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Insurance

Home money-making schemes: are you covered?

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
18/09/2015

Renting out a room or starting a home-based business may be good ways to bring in some extra cash, but entrepreneurs need to consider how their venture could affect their mortgage and insurance policy. 

A study by Gocompare.com revealed that people often do not consider the impact home money-making activities have on their lease, mortgage agreement or home insurance.

The survey found that a third of Brits have tried to make money from their home, including renting out a spare room to a lodger (7 per cent), fitting solar panels to their roof (6 per cent), opening their home to pet boarding (3 per cent), renting a room to a short-term guest through sites such as Airbnb (2 per cent), running a beautician or hairdressing business from home (2 per cent) and renting out a parking space, driveway or garage (2 per cent).

However, 26 per cent of those who have run an ‘earn from your home’ scheme had not considered their activities might invalidate their home insurance, 13 per cent had not considered whether they would need to be licenced to run their home business and 11 per cent had not received permission from their mortgage lender, landlord or housing association to do so.

Some 18 per cent said that they had not informed their home insurer about their home business venture. Of the six per cent who had made an insurance claim as a result of their home business activities, four per cent had their claims declined.

Home-based money making schemes

Homeowners with mortgages will need to check with their lender to make sure their scheme doesn’t breach the terms of a mortgage agreement.

Likewise, if a property is rented, leaseholders may need permission from their landlord, and will need to make sure they are not breaking the terms of their tenancy agreement.

They should also check the implications for their home contents and buildings insurance. If they don’t tell their insurer and need to make a claim then their insurer may refuse to pay the claim and their insurance could be invalidated.

Renting out all or part of a home

Home insurance premiums are partially based on who lives in a property and what a property is used for. An insurer will want to know if a homeowner plans to rent all or part of it, even on a short-term basis.

Insurers may refuse cover, charge an extra premium or restrict the cover provided. Public liability cover will cover homeowners in the event someone injures themselves on or around their property.

Installing solar panels

Solar panels are typically covered by buildings insurance, although consumers will need to check with their insurer that their buildings sum insured covers the value of panels.

Running a business from home

A home insurer will want to know the nature of a home business, whether it will entail regular business-related visitors and/or the storage of specialist equipment or business stock.

If a home business is mainly administrative, then this will probably have little impact on home insurance. A business with regular business-related visitors – such as an accountancy or beautician business – will have a bigger impact on cover/premiums and public liability insurance and/or specialist cover for business equipment or stock kept at home may well be necessary.

Pet boarding

Damage caused by pets is a common exclusion under standard household insurance, so consumers that look after other people’s pets in their homes may need to upgrade their insurance or buy a specialist policy.

They should also consider public liability insurance and specialist cover for liability (e.g. accident or illness) to the pets in your care.

“For many people, making extra cash from their home – whether it’s starting a home-based business, or renting out all or part of their property – is an attractive proposition and can provide some much needed income,” said Ben Wilson, Gocompare.com home insurance spokesman.

“However, people taking advantage of their home to earn money need to be careful they are not breaking any rules, otherwise their ‘earn from home’ scheme could end up leaving them seriously out of pocket.  This makes it important to always check with your mortgage lender or landlord and your insurer before embarking on any home-based money making scheme to make sure you stay legal and have the cover you need.”

Gocompare.com have published an interactive infographic, revealing how consumers can monetise almost every area of their home. Click here to view.

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