Home Insurance With Lodgers

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Lodger Home Insurance

If you have a spare room in your home, you may have considered taking in a lodger. Under the so-called Rent a Room scheme, the government grants tax concessions to homeowners and others who let a spare room in their homes to a lodger. So, you could enjoy extra, tax-free income (up to set limits).

Here we discuss what you need to know about having a lodger, including the need for lodger insurance.

What is live-in landlord insurance, and what does it cover?

If you have decided to take in a lodger, you effectively become a live-in landlord. Indeed, the principal distinction between a lodger and a tenant is that the former shares much of the accommodation (bathroom, kitchen and often the sitting room) with a live-in landlord, whilst a tenant typically occupies self-contained accommodation.

Insurance is needed whether you receive rent from either tenants or lodgers, but there may be specific risks associated with a lodger sharing your own home:

• theft may be a particular concern, for example, since your lodger may have access to the whole of your home, without needing to break in or attempt to break into it;
• liability insurance is also necessary to indemnify you against the risk of your lodger injuring themselves or having their property damaged and holding you liable as their live-in landlord;
• the risk of accidental damage to your possessions and the contents of your home is likely to increase when you have a lodger living there; and
• the risks increase, of course, the more lodgers you have sharing your home.

This is where lodger insurance steps in, to cover the extra risks of having someone living in your home.

Why may you need lodger insurance?

The unique nature of the risks associated with a lodger living with you means that other forms of home insurance are unlikely to be sufficient or appropriate.

Specialist live-in landlord insurance is necessary because neither standard home insurance nor landlord insurance (designed for a property you let to tenants) is likely to cover the risks you face.

If you are yourself a tenant – and have gained the permission of your landlord – you, too, might take advantage of the Rent a Room scheme. In that case, you might be even less familiar with the scope of or need for property insurance and live-in landlord liability cover – yet the same risks remain when you have someone lodging with you.

Whether you are a homeowner or tenant and are sharing your home with one or more lodgers, therefore, you might want to give serious consideration to your need for live-in landlord insurance (also known as lodger insurance).

What is a Lodger?

As discussed above, a lodger is someone who lives in your home and shares living space (i.e. a kitchen and bathroom) with you.

This is different to a tenant who typically lives at a property you own but which you don't live in. If someone lives in your home but doesn't share living space (except for perhaps the hallway), they are also considered a tenant.

As there is a distinction between the two – and there may be different legal obligations depending on whether the person is a lodger or a tenant - you must understand what kind of arrangement you have. If you are in any doubt, contact your local council or authority for clarification.

Can I legally rent out a room?

If you are considering having a lodger, legally, there are a few things you need to check first.

• if you are a tenant looking to rent a room out at the property you yourself are renting, you must speak to your landlord. Again, you will typically need their agreement;
• if you own your home, you will need to speak to your mortgage provider to ensure that having a lodger will not breach the terms of your mortgage contract with them. You will also need to get their permission;
• if you're a leaseholder, you should check the terms of your lease agreement and, again, may need permission from the leaseholder.

Finally, if you are not legally able to have a lodger but you take one anyway and get lodger insurance, in the event of a claim, it could be rejected.

Do I need a new home insurance policy if I have a lodger?

Different home insurers may have different approaches as to covering a lodger. In the first instance, speak to your current home insurance provider to understand your insurance options.

Do lodgers need their own insurance?

Typically, yes. Your lodger home and contents cover generally will only provide cover for your buildings, contents and any liability issues. Your lodger may need to buy their own renter's contents insurance to ensure that their personal possessions are covered.

Other things to consider

• you will need to inform your local authority if you have a lodger because it could affect your council tax;
• if you plan to take in a lodger, you'll have to check their immigration status before renting the room;
• if you sign up to the rent a room scheme, (as at September 2021) you can earn up to £7,500 per year in rent (or £3,750 if you're letting out a room jointly) without having to pay tax. If you earn more than that in rent, you will need to fill in a tax return and send it to HMRC;
• you need to check whether there are any financial implications of taking in a lodger if you receive benefits;
• you will need to understand the legislation surrounding having a lodger in terms of keeping your home safe. This may vary depending on where the property is in the UK, but may typically include:
  • an annual gas safety check on all appliances and flues
  • making sure all electrical appliances are safe
  • taking fire safety precautions such as smoke alarms and carbon monoxide detectors.

Why choose UKinsuranceNET for your lodger insurance?

Any kind of property insurance is important. The complexities are compounded by the fact that there are so many different variations, with each type of insurance specialising in the particular protection you need when living alone in your home, letting your property to tenants or taking a lodger into your own home.

Here at UKinsuranceNET, we have the experience and expertise to recognise when specialist forms of insurance are needed – and that extends to the unique requirements for lodger insurance and the protection it gives.