If you have a spare room in your home, taking in a lodger might prove a win-win situation all round. You get to earn a little extra money from the rent you receive, the lodger has somewhere to live, and even the government is happy about your small contribution towards solving the nation’s current shortage of affordable housing.
Indeed, the government welcomes your initiative so much that it is prepared to offer tax concessions under its so-called Rent a Room scheme – the scheme currently allows you to earn as much as £7,500 a year tax-free.
If you are going to take advantage of the scheme, however, it is essential to recognise the risk of loss or damage to your home and arrange suitable lodger insurance to guard against it.
Citizens’ Advice goes into some detail about the differences between tenants and lodgers, with the latter typically occupying furnished accommodation only, enjoying relatively restricted rights of tenure, and the landlord granted wider freedoms to enter the lodger’s room without advance notice.
Just as there are differences between the conventional landlord and tenant relationship, therefore, so there are also differences between landlord insurance and lodger’s insurance.
Your risks when taking in a lodger
Whereas a tenant is likely to be occupying quite separate self-contained accommodation, your lodger is sharing your home with you – and this gives rise to the distinct risks which we have outlined in an article published in our Knowledge Base on the 9th of August 2017.
There are areas of similarity, of course. Lodger insurance – just like landlord insurance or regular home insurance for that matter – is designed to protect the structure and fabric of your building against such severe risks as fire, flooding, storm damage, explosions, impacts, vandalism and theft. We are able to arrange such building insurance for up to a total of £1 million.
When it comes to contents insurance, the risks are different in nature because your lodger is sharing your home with you. There is no breaking and entering – no burglary – involved, for example, if an unscrupulous lodger decides to steal from you. The distinction is typically recognised by the contents insurance included in your lodger insurance so that special protection is afforded your personal possessions and belongings, together with the risks of accidental damage to your property.
We are able to arrange up to £100,000 of contents insurance as part of your lodger insurance.
When you are sharing your home with a lodger, you are still responsible for exercising due care for their health and safety. If your lodger injures him or herself or has their property damaged, for example, they may hold you liable and sue you for compensation. Since your liability as a landlord is not diminished in the case of a lodger, this liability indemnity insurance typically provides at least £1 million of cover (with our policies, this goes up to £5million).
In the general course of events, you may be likely to accommodate just a single lodger. But if you own and occupy a larger property, you may be able to take in more. For that reason, the lodger insurance we arrange here at UKinsuranceNET may provide cover for up to five lodgers (in contrast to the limit of three lodgers of many other such policies).