Whether you’re in a cash crunch or plan on being away from your apartment for a bit, you might consider subletting your place.
And why not? You don’t want to pay rent for a place you’re not living in. When it comes to short-term rentals, be it through a platform like Airbnb, or subletting to a friend, there are some things you need to know.
What your tenant insurance covers
Tenant insurance offers three coverage types:
● Contents insurance – protects your valuables like furniture and electronics.
● Liability – protection in case someone injures themselves in your unit, or you damage an adjoining property.
● Living expenses – pays for your accommodation needs and related costs If you’re affected by an insured loss (e.g. flooding or fire).
Your own renter’s insurance policy only protects you, not the subletter. So, while you’re away, inform your insurer about the change and inform the sublessee to get their own renter’s insurance.
Renter’s insurance doesn’t cover water damage beyond a burst pipe or even identity theft. Still, you can customize and add coverage extensions to your policy to protect against those perils or simply make sure to take necessary precautions against them.
Questions your tenants insurance provider will ask
The initial questions when setting up a policy are where you live, the type of space and square footage, who lives in the home with you, the cost of all your contents, and when you need the policy to start.
If they don’t ask about subletting or using home-sharing programs, be forthright with that information. Lying to your insurance provider could lead to a denial of a submitted claim and cancellation of your policy. Subletting may also increase your premium because there is a higher risk of a claim while you’re away. If you sublet often, the riskier you are to insure, so keep it to a minimum if you can.
Check on rules and regulations
It’s important to know what overarching contracts are in place that may affect your decision. Whether it’s already in your lease agreement, rules set out by the condo board or municipal laws, you want to understand and comply with these rules before listing your apartment’s availability. Also, knowing the rules will make for a better impression with your landlord. For instance, according to Ontario’s Residential Tenancies Act, you can’t sublet for a rent that’s greater than your own.
Ask your landlord
The act also stipulates, “A tenant may sublet a rental unit to another person with the consent of the landlord.” So, you need to be clear and upfront with your landlord to avoid legal action or eviction. Tell them the reasons why you want to sublet. They may offer an alternative, or even say no, so prepare yourself, think of their questions and be ready with solutions. It’s important to show your landlord you care about the space, and the building. Don’t make it about making money, but rather a method to cover expenses while you’re away.
Speaking with your landlord is essential, and not only because it’s their property, but they’ll be taking on some risk themselves. Renter’s insurance covers your contents and if any injuries happen within your unit. Their insurance policy covers risks for the building. If your new sublessee injures themselves on the shared front steps, it falls to their landlord’s insurance policy, not yours. The more you help your landlord, the greater likelihood of success.
Create rules that work for everyone
Reach an agreement with your landlord about the sublet length, how many people can stay, and be sure to disseminate the rules to each tenant. Keep your landlord informed of any renter changeovers. Share valuable information like emergency phone numbers, evacuation plans, and where the fire extinguisher is located. Over-communicate with your guests about expectations and rules. Remember, this is a risk you’re taking on, and you want to avoid any problems.
What about home-sharing?
Here’s what you should know about home-sharing platforms, like Airbnb. Airbnb offers 2 types of insurance, each offering $1 million for third-party claims and property damage. Sounds pretty good; however, this Airbnb insurance isn’t for you, it’s for the homeowner.
And most home insurance providers don’t allow for short-term rentals. Airbnb themselves state on their website that their insurance doesn’t replace the homeowner’s insurance. Your landlord will need to check with their insurer if you want to go the Airbnb route.
The real challenge is because you don’t have an insurable interest as someone who doesn’t own the property, so getting coverage in your name might not be possible. To make matters more complicated, you could even void your tenant’s insurance if you home-share without notifying your provider.
In the end
Subletting your apartment, like most income producing ideas, carries some risk. Seek to protect yourself for a smoother experience.
Guest post by Tyler Wade, Content Writer at Ratehub.ca. Ratehub.ca is Canada’s leading comparison site for mortgage rates, credit cards, bank accounts, investing products and insurance rates.