Many property owners consider renting out their homes to multiple, unrelated individuals rather than a single family. This common scenario can be ideal for housing students or young professionals, but it’s crucial to ensure that your insurance coverage aligns with this type of occupancy.
When renting your property, always disclose the exact occupancy to your insurance provider. Whether your tenants are a single family, multiple unrelated individuals, or students, being transparent with your insurer helps ensure you have the right coverage for your specific situation. Many insurance companies are willing to insure single-family rentals, but as the occupancy shifts—such as turning into a rooming house or student rental—your options for coverage may narrow significantly. Even if you’re considering renting to a single family, double-check with your insurer to confirm they’ll cover this type of occupancy.
What is Considered a Rooming House?
For insurance purposes, a “rooming house” generally refers to a property where three or more unrelated people share a self-contained unit with access to exclusive facilities like a kitchen and bathroom.
Definitions can vary by insurance provider, so it’s essential to check with an insurance professional to confirm how they categorize your property.
Common Misconceptions About Rooming Houses
There are several misconceptions about rooming houses when it comes to insurance:
- Myth #1: If all tenants are on one lease, it’s not a rooming house. This is false. For insurance purposes, it doesn’t matter if you have a single lease or individual leases with each tenant; the occupancy remains classified based on the number of unrelated people sharing the space.
- Myth #2: If doors don’t have individual locks, it’s not a rooming house. This is also incorrect. Locks on bedroom doors are not a factor in determining occupancy for insurance purposes.
- Myth #3: If rent is paid as one lump sum, it’s not a rooming house. Whether tenants pay separately or in a single payment, the occupancy classification doesn’t change.
What’s is a Student Rental House?
Historically, insurance companies classified properties with three or more unrelated people as rooming houses. However, in recent years, some insurers have started distinguishing student rentals from other rooming houses. Generally, a student rental house involves three or more unrelated tenants who are enrolled in post-secondary education, such as a college or university. Some insurers will recognize this distinction and treat the property as a student, while others may still classify it as a rooming house. To see if you need student rental house insurance or rooming house insurance it is best to speak to a broker regarding your specific situation.
Denied Claims Due to Occupancy Changes
Claims can be denied if your insurer isn’t informed about a change in occupancy. For example, in the Heer vs. Allstate case, a property owner with a homeowner’s policy was denied a claim because they hadn’t informed the insurer that the occupancy had shifted to a rental property.
Be Transparent with Your Insurer
When renting out your property, particularly if considering various lease arrangements, discuss your plans with an insurance professional. They can guide you on whether you need a different policy or updates to your current one. It’s always best to clarify your coverage before the occupancy changes. Doing so protects you from the risk of denied claims or inadequate insurance if the property’s use no longer aligns with the policy terms.