Exclusions exist in all homeowners insurance policies. Contracts have rules and stipulations. An exclusion clause, essentially, means conditions exist to protect an insurance provider from paying a claim due to egregious or negligent conduct on the part of a policyholder. Not everyone reads their exclusions carefully. Would-be landlords cannot afford to make this error. Fully understanding a policy's exclusions is a must for any homeowner planning on renting out a vacant room.
Commercial vs. Noncommercial Policies
Depending upon the policy's wording, renting may be deemed commercial use of a property. An exclusively noncommercial policy may state renters are not covered in any way, shape, or form. Or, the policy states one or two renters -- but no more -- are covered in full. The main point here is to never make assumptions about what is or is not covered. Anyone who wishes to rent out a room positively should review a policy prior to bringing on a boarder.
Actions of the Tenant
The activities performed by the tenant can have an impact on homeowners insurance coverage claims. These are two examples of exclusions a homeowner might not take into consideration prior to renting:
- Criminal Activity and Exclusions
Few policies are going to cover accidents and liabilities due to a criminal act conducted on the premises. Renting to someone who, for example, ends up being involved with illegal drugs could absolutely complicate matters. A tenant who injures someone through the course of committing an illegal act is doubtfully going to be covered under a policy. This could include anything from bodily harm to wrongful death. That said, certain policies may extend liability coverage to include the criminal activities conducted by a renter without the knowledge or consent of the homeowner.
- Business Activity and Exclusions
The renter may be both living in a room and also running a home based job from the location. A homeowners insurance policy may have exclusions for business conducted on the premises. How business is defined could factor heavily in how the exclusion is interpreted. A person working full-time on a computer may fall outside of the business exclusion. An individual who is conducting personal training sessions in a room loaded with exercise equipment, however, may not.
Discuss Exclusions with the Provider
Prior to renting out a room, contact the insurance agency to see what current coverage provides for and what specific exclusions are present. Determine if a new policy must be underwritten. Whether or not a new policy has to be drawn up, be sure a detailed written list notating all the exclusions are provided by an agency, such as Central Florida Insurance Agency of Town 'N' Country.