Does homeowners insurance cover guest houses?

Home insurance includes coverage for guest houses, but if you rent it out you’ll need a separate landlord insurance policy.

Kara McGinley

By

Kara McGinley

Kara McGinley

Property and Casualty Insurance Expert

Kara McGinley is an insurance editor at Policygenius, specializing in home, auto, and renters insurance. She's been writing about insurance since 2019, and her work and insights have been referenced in Kiplinger and WRAL.com.

Published May 10, 2021|3 min read

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Homeowners insurance protects your home and personal property from covered perils, like fire, home break-ins, and weather-related damage. Your policy also includes coverage for additional structures on your property, including guest houses.

Structures that are not attached to the main structure of your home, such as guest houses, sheds, detached garages, and gazebos are covered under the other structures coverage component of homeowners insurance. 

If you rent out your guest home, you’ll need landlord insurance to cover the structure of the property and any of your belongings inside. If you have family members who live in the guest house permanently, like in-laws or grandparents, that may affect your insurance as well.

Key Takeaways

  • Homeowners insurance covers other structures on your property — including guest houses and sheds — if they’re damaged by a covered peril, like fire or weather-related damage

  • Home insurance also protects personal property inside your guest house

  • If you rent out a guest house, you’ll need landlord insurance to be properly covered

When does home insurance cover your guest house?

Homeowners insurance will cover the structure of the guest house and any of your belongings inside. Each section of coverage in your home insurance policy has a limit of liability, or the maximum amount the insurance company will pay you for a covered loss.

Other structures coverage

Along with covering your main residence, homeowners insurance also includes other structures coverage, a section of your policy that covers separate structures on your property, like a guest house or shed.

In a standard policy, your other structures coverage limit is 10% of your dwelling coverage limit. That means if you have $400,000 in dwelling coverage, the most an insurance company will pay you for repairs to your guest house is $40,000. But you can always elect for more coverage for an additional premium.

Personal property coverage

Homeowners insurance also includes coverage for damaged or stolen personal property. That means if a pipe in your guest house bursts and damages your furniture, home insurance may help pay to repair or replace it. If a relative is living in your guest house full time and they have their own belongings, you can increase your personal property coverage limits to fully protect both of your belongings inside the guest house.

Personal liability coverage

Liability coverage pays for legal or medical expenses if you are found liable for accidental injury or property damage. This coverage extends to additional structures on your property, so if a neighbor were to fall down your guest house stairs and sustain an injury, you’d be covered against any potential lawsuits.

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Homeowners insurance for guest house rentals

You don’t need to take out a separate policy for your guest house, since it’s already covered under the other structures coverage component in your homeowners insurance.

However, there is a section in your policy that will list a bunch of exclusions, and coverage for “structures on your property that are used in whole or in part for business purposes” is one of them. Renting out your guest home is a source of income, so it’d technically be considered a business.

Home sharing coverage

Many home sharing companies, like Airbnb, offer their own insurance options. You should let your insurance company know before you start renting out your guest house through short-term rental services. Your insurer may offer a short-term rental endorsement that you can add to your policy.

Landlord insurance

Landlord insurance is a type of property insurance for people who rent out their home for an extended period of time. If you rent out your guest house on a long-term basis, you’ll need a landlord insurance policy.

With landlord insurance, you have coverage for the structure of your guest house, your personal property inside the residence, and your liability if someone gets hurt. It also includes loss of income coverage, which reimburses you for lost wages if your guest house is damaged and becomes temporarily uninhabitable for tenants.

Learn more about landlord insurance here.

Renters insurance

Landlord insurance covers the structure of the guest house and your financial interest in the property, but it won’t cover your tenants’ personal belongings. That’s where renters insurance comes in. Renters insurance covers tenants’ personal property, personal liability, and additional living expenses if the guest house is damaged and they need to live somewhere else temporarily.

Learn more about renters insurance here.

When does home insurance not cover your guest house?

Homeowners insurance won’t cover your guest house if it is damaged by any of the following events:

  • You rent it out and don’t notify your insurance company

  • Flood damage

  • Earthquake or any type of earth movement

  • Maintenance issues

  • General wear and tear over time

  • Pest infestations

  • Negligence

FAQs

My in-laws live in my guest house, do I need a separate insurance policy?

Residency laws vary by state, but typically any relative that lives with you full time is covered by your policy. You won’t need separate homeowners insurance to protect the the guest home, the structure of the guest house and the belongings inside it are already covered by your policy. Be sure to let your insurance company know all the relatives who are living in your household.

Does my friend need renters insurance if they live in my guest house?

Yes, to protect their belongings and liability, they’ll need renters insurance. Even if your friend isn’t paying rent and lives at the house full time, your insurer will still consider them tenants of the residence. Check with your home insurance provider to see if it's possible to add your friend as a named insured on your homeowners insurance.

Does homeowners insurance cover Airbnbs or other home-sharing services?

Airbnb offers their own insurance options, called host protection insurance, which pays up to $1 million in coverage if a guest files a lawsuit against you. Airbnb also offers a host guarantee, which reimburses you up to $1 million if a guest damages your home. Home insurance generally excludes coverage for rentals, but you may be able to add short-term rental coverage to your policy for more comprehensive protection.

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