Insuring a Home You Rent Out to Family
Letting a property to a relative feels different from a commercial tenancy and is treated the same way by insurers. The property is not owner-occupied, and standard home insurance is written on the assumption that it is.
Why it matters
Standard home policies require the policyholder to occupy the property. Once someone else lives there, the risk profile changes and cover may not respond.
Insurers ask whether the property is let. Answering inaccurately is a misrepresentation with the usual consequences.
The same applies to letting a room, taking in a lodger, or allowing a relative to live there rent-free, though the treatment of each differs between insurers.
What landlord cover adds
Property owners' liability, protecting you if the occupant or a visitor is injured because of a defect in the building.
Loss of rent while the property is uninhabitable after an insured event, where rent is charged.
Cover appropriate to a property you do not live in, including the unoccupancy provisions that apply between occupants.
Contents
Your contents in the property — furniture, appliances, carpets — need landlord contents cover. The occupant's possessions are theirs to insure.
Make that explicit, since relatives frequently assume your policy covers their belongings and discover otherwise after a fire or flood.
Other obligations that apply regardless of the relationship
Gas safety certification, electrical inspection and smoke alarm requirements typically apply to any tenancy, including one with family.
Mortgage terms usually restrict letting without consent, and consent to let is required even for a family arrangement. Letting without it can breach the mortgage.
Tax on rental income applies whether or not the tenant is related, and letting below market rent affects what expenses can be claimed in some systems.
The informal arrangement problem
Family lettings frequently have no written agreement, which causes difficulty if the arrangement ends badly or if either party needs to evidence the position.
A written tenancy agreement protects both sides and is what insurers and lenders expect to see.
It also clarifies responsibility for repairs and bills, which is the most common source of friction in family arrangements.
Practical step
Tell the insurer exactly what the arrangement is, including whether rent is charged and whether there is a written agreement. Ten minutes on the phone prevents a declined claim.
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