• Home insurance when renting out a house: Caution is the word!

    4 September 2019Christopher Johnson

    Real estate has long been considered a stable growth investment modality and many people are therefore tempted to buy houses in order to turn them into rental property. Indeed, not only do the houses’ value increase over time, but they also generate rental income, which can be quite interesting. Insurance-wise, however, one can easily imagine that insuring such properties will be quite different from insuring a standard home. Since we regularly receive calls from people in this situation, we at Assurances Multi-Risques would like to offer a series of tips that will help you to avoid insurance headaches.

     

    What can you expect from your insurer?

    If you decide to rent out your house, the first thing that you must do is to inform your insurer as your home insurance contract will have to be modified. A rental home contract is different from a standard home insurance contract where it’s automatically assumed that the owner is the one inhabiting the house. You must also check if your standard home insurance contract contains a clause excluding professional activities. Insurers consider home rentals a professional activity because it generates income. Moreover, renting out your house will increase your insurance risk level since you will no longer be living on the property. This means that your home insurance premium will go up and that your level of protection is likely to go down. Moreover, in order to lower their overall risk, insurers are also likely to insist on insuring the property where you live, which represents the contract’s main insurance risk. Keep in mind that you must absolutely avoid making false statements to your insurer as he will automatically refuse to compensate you if he finds out what you have done. This means that in case of damage, you will have to pay for any repairs yourself, which means that you will have paid insurance premiums for nothing.

     

    Here are a few tips for those who decide to rent out their property :

    • Contact an independent insurance broker who specializes in rental properties;
    • Always ask your tenant for references;
    • Always conduct a credit investigation for new tenants;
    • Check if the tenant has a criminal record. If, for example, your prospective tenant has previously been convicted for growing pot, you might be well advised to find another tenant;
    • Make sure that your tenant has tenant insurance;
    • Make surprise visits to the house in order to make sure that the place is kept in good shape;
    • Have your lease documents reviewed by a legal counsel.

    Renting your house should be a positive experience that generates additional short or long term income. It can, however, rapidly turn into a nightmare if you are not aware of the game’s ins and outs. In addition to saving you a lot of time, an insurance broker will make sure that you get the insurance contract that best fits your needs and thus increase your chances of success following an informed and rational decision process.

    Now that you have saved all this time not shopping for insurance, how are you planning to spend it?