With fewer people buying their own home, the huge student population we have in the UK and the labour force become increasingly mobile, the opportunity for renting out rooms has grown enormously.
Coupled with the Government rent-a-room scheme, whereby you can earn £4,250 a year tax-free without even having to declare it, it’s no surprise that the number of live-in landlords is booming.
200,000 households have a lodger
Buytolet.org says there are now some 200,000 households with a lodger. And Spareroom.co.uk research shows the number of people looking to rent-a-room is growing too, rising by 20% in the year to January.
However, if you don’t tell your your home insurance provider and something went wrong in circumstances involving your lodger, you may find any claim you make is rejected.
Your ‘risk’ level increases with lodgers
For the purpose of assessing you as a ‘risk’, insurers need to know who is living at your property and what their relation is to you.
Providing what is often a total stranger with keys to your home is, understandably, seen by insurers as increasing your risk profile, and your cover may need to be adjusted accordingly.
Indeed, some insurers view the increased potential risks a lodger poses involving security, fire and water damage (even if they seem to be incredibly sensible to you!) as being so problematic that they’ve won’t allow you to rent out rooms at all.
More about increased risk and lodgers…
From an insurer’s perspective, it’s understandable that they need to know about anyone moving in to your home.
If you don’t give them details of the lodger, it means they know nothing of the individual concerned. For all they know (and you possibly!), it could be a criminal on the run, or at least someone with a previous conviction for arson, for example.
Additionally, what if the lodger injured themselves in your home and decided it was your fault? You could end up being sued for a lot of money, so at least if you do end up having to pay more for your cover, make sure it includes legal protection for just such a situation.
What you need to do and check
Most insurers stipulate that those living in a home permanently should be the policy holder and immediate family only, and that they should be named in the policy.
When you tell an insurer you’re considering taking in a lodger they may be willing to add them to a policy, but not all will.
Some take it on a case by case basis, depending on things such as occupation and age. Some will simply not allow it, in which case you’ll have to look elsewhere for cover (see below).
Tell your insurer before the move in date – The first thing to do is tell your insurer what’s happening before the date the lodger moves in. This way they can assess the risk and possibly adjust your policy and premiums to ensure you’re covered. Or, if they won’t allow it, you have to time to find the right insurance elsewhere.
- Maximum number of lodgers – If your insurer says they will cover you, double check the maximum number of lodgers you’re allowed in case you want to rent out more rooms in future.
- Students – Some policies allow lodgers, but not if they’re students.
- Legal liability – If you’re worried your lodger could end up suing you for whatever reason (or you them!), check the policy includes legal liability cover (specifically for lodgers).
- Accidental damage cover – You might not currently have cover for accidental damage included in your policy, but it could be a very good idea to have it included as you probably won’t know how careful a person your lodger is.
- Previous convictions ‘waver’ – Get the lodger to sign something declaring they have no previous criminal convictions, or are awaiting trial. This could be vital if you make a claim only to find out they do.
- Specialist insurers – If your current insurer declines, shop around in the usual way. However, if you still can’t get cover, the National Landlords Association provides details of specialist providers at www. Landlords.org.uk
- Rejected claims – If you have a claim rejected on the basis you have a lodger, and disagree with the decision, you can approach the Financial Ombudsman Service to make a complaint: www. Financial-ombudsman.org.uk
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