Lodger insurance

15/10/2024

Lodger insurance explained

Taking on a lodger can be a great source of extra income, especially when supported by the UK’s Rent a Room Scheme. It is a popular option with homeowners over 50 or 60 whose children have moved out. However, you will need to understand how having a lodger impacts your home insurance coverage. Otherwise you could risk claims being rejected, or even completely invalidating your policy.

Can I have a lodger in the UK?

There has been an 89%* increase in homeowners taking in lodgers since 2001. It can be an equally beneficial arrangement for both homeowners dealing with the rising cost of living, and renters struggling to find affordable housing.

Whether or not you can have a lodger will depend on your living arrangements.

Taking on lodgers as a homeowner

Some mortgages will require you to get permission from the lender before you can have a lodger. Otherwise you can let out your rooms to lodgers as you please.

Having lodgers when leasing a property

Again this will depend on the terms of your lease. In some cases you might need to get consent from the freeholder before you let out rooms.

Tenants subletting to lodgers

Your tenancy agreement will specify if you can sublet rooms to lodgers. This is often forbidden or only allowed under certain conditions.

Lodger vs tenant: What’s the difference?

This is an important distinction for insurance reasons. It will also impact the rights of the person who is renting when it comes to things like eviction.

A lodger is someone who pays to live in your home while sharing your amenities and facilities. These can include your bathroom, kitchen and washing machine.

A tenant is someone who rents a room or property that is completely separate from yours. Typically you would live elsewhere.

A good rule of thumb is that if the person has their own front door, they could be considered a tenant. In this case lodger insurance would not cover you, and you could need landlords insurance.

Is a family member considered a lodger?

If the circumstances of your family member’s stay with you fit into the definitions of lodger outlined above, then yes. However, if family or friends are staying with you for a short period of time, and are not paying rent, then there are typically no insurance implications.

How does having a lodger affect my home insurance?

If you are considering, or have already taken on a lodger, you will need to speak to your current home insurance provider and let them know as soon as possible. Lodgers come with increased risks that your insurer will need to factor into your cover. Effects on your home insurance could include:

Added lodger insurance

Lodger liability insurance is an important addition to your home insurance. This can protect you against claims made by the lodger if they are harmed or injured on your property. This can help cover legal expenses and compensation payouts if you are found to be at fault.

Exclusions

Insurers can add exclusions, most commonly excluding claims for theft when there is no sign of a break-in.

Higher premiums

With this additional cover and risk usually comes extra costs. You may need to pay an added premium to your insurer.

Rejection

Some insurers will not insure a home with a lodger at all. This can put you in a difficult spot where you will have to weigh the costs of new insurance against earnings from renting to your lodger. In this case, it is a good idea to shop around and compare quotes for home insurance that covers lodgers.

What does lodger insurance cover?

Lodger home insurance can offer the same coverage as a standard home insurance policy. However, it combines these with other specialist cover to better protect you from risks specific to having a lodger in your home.

Home buildings insurance – Protecting the property building itself, as well as fittings and fixtures.

Home contents insurance – This will only protect your own possessions. However, the lodger can take out insurance on their own lodger contents.

Lodger liability insurance – Protection from the financial implications of the lodger laying a claim against you.

Accidental damage cover – This is typically an add-on, and can protect both your building and contents from damage resulting from a one-off accident, like straighteners burning your carpet.

How much does lodger insurance cost?

The average home insurance policy comes at a cost of £186 annually in 2024. Like with a lot of insurance, this has increased, spiking 35% since the previous year. That’s why it is more important than ever to shop around and compare policies before you commit.

The cost of getting home insurance with a lodger will vary depending on a few factors including:

Whether you pay annually or monthly
What coverage you include on your home insurance
The security of your home
Where you live
The type and size of your home
Your claims history

How do I take on a lodger legally in the UK?

When it comes to taking out a lodger there are a few people who need to be informed to keep everything legal. Who you need to inform will depend on your circumstances and how much you are making from the lodger’s rent. Always double check regulations specific to where you live before taking on a lodger.

Mortgage holders will need to inform their lenders.
Leaseholders or tenants will need to tell the freeholder or landlord.
You’ll need to inform your local authority so it can be factored into your council tax.
Earnings under £7,500 are automatically tax-free under the UK government’s Rent a Room scheme. If you earn over this from lodgers, you will need to complete a tax return, opt into the scheme and claim your tax-free allowance.
You must make sure your home is safe and secure to live in. Check fire safety, follow gas safety regulations, and ensure electric systems and appliances are safe to use.
You have a legal obligation to check your lodger’s immigration status and if they have the right to rent in the UK.
Ensure your circumstances are up to date in regards to any benefits you receive.

How many lodgers can I have?

For the people renting rooms to be considered lodgers, there can not be more than 2 people renting a space in your home. When you have 3 or more lodgers, your home becomes a HMO (house in multiple occupation) which is much more regulated. You need to get a HMO licence and you will have more legal obligations to your lodgers. This is also an important consideration when renting your home as an Airbnb.

Lodger insurance FAQs

Can I claim for damage caused by my lodger?

What insurance do I need if I’m a lodger?

Can I get insurance for loss of rent from a lodger?

Will my lodger’s belongings be covered by my home insurance?

Do you need separate insurance for a lodger?

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Sources:

*https://m.spareroom.co.uk/statistics/increased-homeowners-taking-lodgers
https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme
https://www.gov.uk/rent-room-in-your-home/houses-in-multiple-occupation