Are your clients telling you about their tenants?

If your client has rented out part of their home, there’s nearly the same likelihood that they’ve told their insurer as not, according to a recent survey from RatesDotCa and BNN Bloomberg.

The survey of 1,511 Canadians found that 42% of homeowners that rent out rooms or a floor in their homes (including basements) don’t tell their insurance companies about the tenants. Forty-seven per cent of those polled inform their insurer, while 11% say they either don’t know or prefer not to answer.

“While taking on a tenant might seem like a great way to help ease the financial strain of large mortgage payments or an easy way to earn extra income, if you don’t let your insurer know, it could be a costly mistake,” warns John Shmuel, managing editor of RatesDotCa, in a press release Thursday. “You risk voiding your insurance and paying out of pocket for any damages.”

Insurance Bureau of Canada (IBC) tells Canadian Underwriter that “if a person rents out a room or floor of their house, there would likely be a premium increase in the liability portion of the policy. As each insurance company is different and offers various incentive and bundling programs, we’re unable to provide an estimate on this increase in premium. However, we strongly encourage homeowners to discuss their coverage with their insurance representative and request that their renter/boarder obtains their own tenant insurance policy.”

Not only are some Canadians failing to inform their insurers of tenants, the survey also finds about one-quarter are not even aware of their obligations to do so. Twenty-four per cent of respondents report not knowing they had to update their insurer that a tenant was living on the premises.

But since the pandemic began, there has been only a small increase in the number of Canadians who rent out part of their home: 6% report taking on tenants in the past two years, compared to 5% of homeowners who rented out part of their home before the pandemic.

Eight per cent of polled Canadian homeowners say they have listed their home on a short-term rental site such as Airbnb. Hosting short-term rentals requires additional insurance on top of the standard homeowner’s policy.

RatesDotCa notes the number of property claims made across Canada is rising. According to IBC, property claims as a percentage of total claims in Canada increased 33.9% from 2010 to 2020.

Failure to provide full disclosure related to occupancy may void your insurance policy. Home insurance policies only cover property, contents and personal liability and that of a spouse and dependents. “It does not include your tenant’s or boarder’s contents and personal liability,” IBC reports. “Should a fire destroy your tenant’s or boarder’s belongings, you may be held responsible for compensation of that person’s lost or damaged contents if you are found liable for the fire.”

Feature image by iStock.com/fotostorm