Dear Insurance Adviser,
I am thinking of renting out my basement. Would this cause my home
insurance rate to go up substantially? Is there any way of
estimating how much my rate would increase?
Good news! You can rent out your basement without jeopardizing your
insurance coverage or even paying an extra premium. You can qualify
for the same home insurance as long as you don’t have more than two
roomers or boarders.
Here are some risk management tips.
- Be sure to check with the city to make sure there are no local
ordinances preventing you from legally renting out the basement.
For example, a separate entryway may be required. Or, smoke
detectors and a fire extinguisher may be necessary.
- Second, make sure tenants understand that they are responsible
for their own personal property because your policy won’t provide
any coverage. The best solution for them is to have renters
insurance. It not only covers their personal belongings, but also
includes personal liability coverage in the event that they harm
someone or something.
- Third, spend a little money with an attorney and protect
yourself with a good lease. In this case, keep in mind what they
say about an ounce of prevention being worth a pound of cure!
- And fourth: Raise your home insurance liability limits to at
least $500,000, and get a supplemental umbrella policy for at least
$1 million. If you already have an umbrella policy, consider
raising it by an extra million dollars. If a tenant gets injured on
your premises, you probably will get sued. This extra liability
coverage, which will probably cost you $150 a year, will prove to
be a real bargain in the event of a lawsuit.
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