Home insurance if you have a lodger – how it works
Home insurance if you have a lodger – how it works
If you’re considering renting out your spare room to earn some extra cash, there are implications for your insurance. You may need to update your home insurance if you have a lodger, or you may need to switch providers. Here’s what you need to know…
Can you legally rent out a room?
The first thing to think about is whether you can legally have a lodger. It depends on your living arrangements:
- if you own your home, then there’s no legal reason why you can’t rent out your spare room
- if you have a tenancy agreement with a landlord, you’ll need to check what the agreement says and you may need to ask for permission from the landlord.
- if you’re a leaseholder, then you should check the terms of your lease. Again you may need to ask for permission from the leaseholder.
You need to be careful to stay inside what is permissible. If legally you’re not able to have a lodger, then even with insurance that covers a lodger, you are at risk of not having your claims paid by your insurance provider.
What's the difference between a lodger and a tenant?
A lodger lives in the landlord's main home and shares the accommodation and facilities. If the landlord doesn't live in the property, then you will be a tenant. Tenants and lodgers have a different status in law, so you need to be clear what the situation is.
If the person renting has their own front door or only shares a hallway, for example in the equivalent of a granny flat, then they will be a tenant and you could need landlord insurance instead.
Why does having a lodger affect your home insurance?
How much you pay for your insurance depends on risk – for example, the risk of you getting burgled. That’s why some insurance providers will lower your premiums if you have better locks on your doors and windows.
Generally, insurance providers consider that a lodger is an extra risk. A lodger is one extra person with a key to your home, who you might not know much about. There’s always a risk that they might be careless, cause malicious damage or steal from you.
Getting home insurance for a lodger doesn’t mean getting a separate policy. It means changing your home insurance policy to take the extra risk into account. Some providers may not be willing to offer you cover if you have a lodger, so you may need to switch home insurance providers. You may be charged a fee for cancelling your policy part way through the insurance term.
What’s the impact on home insurance if I have a lodger?
If you get a lodger, you need to tell your home insurance provider about it. If you don’t, you could find that your policy is invalid should you have to make a claim.
Here are some things your provider might do:
- ask you to include extra liability insurance to cover you if your lodger takes you to court – they fall down the stairs, for example, and injure themselves
- add exclusions to your home insurance – for example, you might not be covered for theft from your home if there’s no obvious sign of a break-in
- refuse to cover you because they consider having a lodger is too big a risk
- increase your premium to take into account the extra risk
It’s definitely possible to get home insurance with a lodger – after all, in 2015 around 2.7% of households had one, so it’s in insurance providers’ interest to find a way to insure them.
If your insurance provider refuses to cover you when you have a lodger or charges more than you can afford, don’t worry – just compare home insurance with us to find an alternative insurance provider.
Who else needs to know you have a lodger – and why?
- Your mortgage provider needs to know about your lodgers or you risk being in breach of your mortgage contract.
- Your local authority needs to know if you have a lodger because it could affect your council tax.
- You may need to fill in a tax return. If you sign up to the Rent a Room scheme you can earn up to £7,500 per year in rent (or £3,750 if you’re letting out a room jointly) without having to pay tax, but if you earn more than that in rent, you’ll need to fill in a tax return and send it to HM Revenue & Customs.
- It might impact your benefits. If you receive benefits of any kind you should think about whether there are any financial implications of taking in a lodger.
If you need more help to understand your responsibilities when you take in a lodger, see this government guide: Letting rooms in your home: a guide for resident landlords.
Are a lodger’s possessions covered under home insurance?
Usually your insurance will cover your own possessions, not your lodger’s. Some insurance providers may let you extend your cover to include your lodger. Otherwise your lodger will need to organise their own contents insurance.
What other considerations are there when it comes to lodger insurance?
Check whether your insurance will pay for alternative accommodation for you and your lodger if your home becomes uninhabitable because of an event you’re insured for, so a fire or flood, for example.
Get a good deal on home insurance with a lodger
If you’re considering taking in a lodger into your spare room, you’ll want enough home insurance to give you peace of mind. That’s where we can help. We’ll search insurance providers to find you great-value home insurance cover that meets your needs.