Lodger Affect Home Insurance

Taking in a lodger is a solution to making some extra money from your spare bedroom once the kids have grown up or if you are no longer able to afford the house as the only occupant. By sharing your household running costs, it can help you financially with your bills, save some money or just pay back your mortgage. Furthermore, with the government’s Rent a Room Scheme, you can earn up to £7,500 per year tax-free as a resident landlord.

If you’re considering renting a room in your home, you’ll need to be aware of how your existing home insurance policy may be affected.

In addition to speaking to your lender, we advise that you speak to your home insurer beforehand, as having a lodger could invalidate your existing policy, leaving you unprotected. They will be able to guide you through exactly what specialist home insurance with lodgers cover you’ll need.

There is a higher risk when renting out a room to people you don’t know compared to, for example, letting your friends and family stay with you for a bit over the holidays. Many insurers will expect you to run a background check on your new lodger to ensure that they don’t have a previous criminal conviction. You may also face some difficulty in getting covered if your lodger is a student.

Does my contents insurance cover my lodger’s contents too?

In a word: no.

You can take out contents insurance to cover any of your own furnishings in your lodger’s room, but this will not cover their personal effects. Your lodger is responsible for purchasing their own contents insurance policy. Room-only contents insurance for tenants is available with many insurers, who are happy to cover the tenant for just their personal possessions within their private room of the property. (Though in some cases you may be required to install a lock on their door, in order to satisfy the terms of their room-only contents insurance.)

Does having a lodger make me a landlord?

You may not consider yourself a landlord but, even if you occupy the majority of the property yourself, you are one in the eyes of the law and will therefore have to abide by the same rules and regulations. Though your lodger with a licence agreement will have less rights than a tenant with a signed tenancy agreement, you still owe them their safety and fairness in your arrangement.

Some mortgage lenders and insurance companies will consider you a resident landlord, despite your insurance being a specialist type of home insurance and not technically landlord insurance. It’s also likely that your bank or building society will want you to switch your residential mortgage to a buy-to-let loan or extend your rates up to a similar level as buy-to-let, depending on a number of different factors.

Other insurers, on the other hand, will recognise that renting a room to a lodger does not make you a landlord. You are still the homeowner, occupying your own property and sharing your facilities with a lodger, and will therefore need specialist home insurance cover. Not live in landlord insurance.

So, does having a lodger make you a landlord? It depends on who you talk to.

Before you decide to take in a lodger, make sure that you’re aware of exactly what that entails both legally and financially. Renting a room in your house is a fantastic idea with many benefits, but it’s not for everyone due to the necessary “red tape” involved in taking on new landlord duties. Choosing to rent the room “under-the-table” without disclosing to insurers and lenders might be tempting, but with recent crackdowns on this sort of thing, why take the risk? If you get caught, then it will affect your future borrowing and insurance premiums, as well as your relationship with the taxman.

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