Will home insurance cover an illegal rental?

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Dear Insurance Adviser,
Does my home insurance cover the damage if I have an illegal rental in a one-family home? I live in part of the house and rent out another part.
— Scott

Dear Scott,
Your homeowners policy will not be jeopardized because you have a renter — legal or otherwise.

The policy allows you to have up to two roomers or boarders, whether they’re paying you or not.

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Note that when you have a rental situation under your roof, you have some additional liability risk. When tenants are injured from a condition on your premises, they can sue you for negligence. Fortunately, your home insurance liability coverage will protect and defend you and pay any judgment against you, up to your policy’s liability limit. So, be sure you carry lots of liability insurance — at least $500,000 to $1 million, or more. The charge for extra liability coverage is minimal.

Be sure to let any tenants know that they need their own renters insurance, because your homeowners personal property coverage will not apply to the property of non-family members.

I hope this helps.

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