Renting Your Home: do you have the right insurance coverage?
No doubt about it, steady rental income can help pay the bills or the mortgage, or even go towards your retirement nest egg. But before you start renting your home, you need to know a few things.
What should you watch out for?
From damage to their home to unexpected costs, bad surprises can end up costly. There are many things that homeowners need to know before renting any portion of their home. Here are 4 key considerations:
- Upgrades and maintenance
Before renting out all or part of your home, make sure it is in tip-top shape. Not only might that involve renovations and repairs, but keep in mind that your tenant’s problems are also your problems.
- Impact on resale value
Consider how a rental suite and the wear and tear could impact your home’s value. Some potential buyers may want a rental apartment that they too can use for extra income, but keep in mind that it could also drive away other buyers.
Unfortunately, some tenants are not as careful as they should be when living in a home they don’t own. Therefore, repairs are more likely when renting out your home. Be prepared for the extra expense.
- Know the rules and regulations
Both landlords and tenants need to understand and abide by provincial and municipal laws. Not following such regulations result in unwelcome fines or disputes with tenants. Renting out part of your property should be seen more as a business deal than a simple rental agreement. Always have written and signed documentation to cover all your bases.
Home insurance: what are you covered for?
Before handing over your keys to strangers, you must know the risks of renting your home and get proper home insurance coverage. For example, are you covered if a paying guest is injured? Well, if you didn’t notify your insurer that you are renting out your home and condo, the coverage included in your policy might not cover you.
Remember that your home insurance policy was designed to meet the needs that you had at the time you purchased it. Some policies may not permit you to rent your home to someone else, even for a brief period. Even if some short-term rental agencies do reimburse hosts for damages up to a certain amount, that doesn’t fully replace your renter’s or homeowner’s insurance.
Do your homework before leasing!
Check with your insurer to determine what insurance coverage you need when renting your home. Friendly advice: be honest! Paying a higher premium upfront is better than living with the consequences of not reporting the situation and suffering a loss. They will ask questions such as how many rooms you want to rent, how often, the security systems you have in place, and whether you’ll be on the premises. Once you understand your risk and your coverage options, you can decide what to do.
5 things to do before renting your home
- Reduce the risk of theft: Lock up your valuables.
- Condo owner? Check to make sure short-term rentals are allowed in your building.
- If you leave town, ask someone trustworthy to be available as a contact person.
- Using a short-term rental platform? Familiarize yourself with all of the terms and conditions.
- Budget for extra costs: This could include everything from toiletries and fire extinguishers to cleaning fees to additional furniture.
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The Personal refers to The Personal General Insurance Inc. in Quebec and The Personal Insurance Company in all other provinces and territories.
The information and advice in this article are provided for informational purposes only. The Personal shall not be liable for any damages arising from any reliance upon such information or advice. The Personal recommends using caution and consulting an expert for comprehensive, expert advice.