Contents Insurance and the Risk of Having a Lodger

The rent-a-room scheme allows homeowners to earn up to £4,250 a year from a lodger tax-free.

The financial upheaval everyone is experiencing at the moment is leading to many people considering whether to take in a lodger.

Difficulties in obtaining mortgages mean people who would normally buy their own homes are looking at sharing a stranger’s home or moving in with friends or family.

Taking in a lodger is also an option that helps make ends meet for thousands of people who have lost or are worried about losing their jobs.

The rent-a-room scheme allows homeowners to earn up to £4,250 a year from a lodger tax-free.

According to one insurance company (Legal & General if you want to name them), 27,000 homes took in a lodger last year.

Finding a lodger is straightforward, but letting out a room can have other implications.

Some practical points have to be thought through, like giving up privacy in your home and sharing facilities like bathrooms and kitchens.

If you don’t know the lodger, then take up references – failing to do so could be construed as failing to protect your own property by the insurance company and become a reason for refusing a claim.

Next tell your buildings and contents insurers you have a new lodger. This is a ‘material fact’ that you must tell the insurer as soon as you can because your risk and policy cost may be affected.

Check the wording of your contents policy, because some policies only cover a visitor’s personal property for a short time. Lodgers are obviously a more permanent fixture, so it’s unlikely a home contents policy covers their possessions.

Failing to notify your insurance company that you have taken in a lodger might invalidate your insurance policy.

Many insurance companies will not insure a landlord’s contents against theft by a lodger.

As a landlord, you also have to take on new responsibilities for your lodger by making sure your home is safe to live in.

This means you should have your gas supply and appliances checked by a registered CORGI engineer, who will issue a safety certificate.

You should also get a qualified electrician to do the same for your electric supply and appliances.

Your gas certificate should be renewed annually. The electric safety certificate really needs to be renewed every five to 10 years.

It’s also a good idea to install smoke and carbon monoxide detectors.

Don’t leave small repairs incomplete – like fastening loose carpets or replacing broken electrical appliances.

Also consider asking your insurance company for landlord’s liability insurance that protects you against a claim for death or injury should something happen to the lodger or their guests on your property.

As a landlord, it’s best to leave lodgers to sort out their own insurance for personal possessions.

Many companies offer contents only packages for lodgers at competitive prices and the separate policy takes away the hassle and time involved in sorting out the policy for the lodger.

It also means you do not have to pry in to their private circumstances to answer all the questions the insurance company might ask.

Contents Insurance and the Risk of Having a Lodger

The rent-a-room scheme allows homeowners to earn up to £4,250 a year from a lodger tax-free.

Finding a lodger is straightforward, but letting out a room can have other implications.

Many insurance companies will not insure a landlord’s contents against theft by a lodger.

It’s also a good idea to install smoke and carbon monoxide detectors.

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