As housing affordability challenges, workforce mobility, and evolving tenant preferences continue to drive demand for more flexible living arrangements, one strategy is becoming increasingly popular among real estate investors: rent-by-the-room properties. Rather than leasing an entire home to a single household, investors will rent out each bedroom under a separate agreement while tenants share common areas like kitchens, living rooms, and bathrooms.  

While college students have long been associated with shared housing, today’s rent-by-the-room market extends far beyond campus communities. Traveling healthcare professionals, interns, graduate students, construction and trades workers, digital nomads, and senior citizens seek these affordable, flexible housing options.  

However, this unique rental structure also comes with unique insurance needs. With multiple unrelated tenants living under separate lease agreements and sharing common spaces, rent-by-the-room properties face greater property and liability exposures than traditionally leased homes. 

What does Rent-by-the-Room Insurance cover?

Coliving rentals and rooming houses present heightened property and liability risks that most insurance providers are either not willing to take on or do not have the means to underwrite.  

NREIG provides a specialized property and liability package designed specifically for shared housing while offering the same monthly reporting structure, flexibility, and convenience you rely on for the rest of your portfolio. The following coverages are included in NREIG’s Rent-by-the-Room Insurance. 

Dwelling

Dwelling coverage protects against sudden and accidental direct physical damage to the property. For instance, if severe weather were to cause a tree to fall on the roof, resulting in structural damage, you may be covered for the cost of repairs.     

National Real Estate Insurance Group offers Basic and Special* Form coverage for Rent-by-the-Room properties. Covered perils may include, but are not limited to:   

  • Fire  
  • Lightning  
  • Windstorm and Hail   
  • Explosion   
  • Smoke   
  • Aircraft and Vehicles    
  • Riot or Civil Commotion   
  • Volcanic Action   
  • Sprinkler Leakage  
  • Vandalism (sublimit applies) 
  • Malicious Mischief 

*Theft excluded from Special Form policies. 

Premises Liability

As you may know, when you own and rent out any home, you open yourself up to liability risks. A Premises Liability policy offers you protection against liability claims that can arise from incidents on your property. Examples may include:   

  • If someone were to slip and fall on your property 
  • If your tenant suffers medical issues from a carbon monoxide leak 

Medical expenses are included for third parties. Our Premises Liability Insurance comes with $1,000,000 per occurrence, $2,000,000 aggregate limits. 

Tenant Liability

This included liability coverage helps manage your loss history, avoid cost increases, and stabilize property insurance rates over time for tenant-negligent property losses. For example, imagine one of your tenants starts a cooking fire. Your property insurance will step in and make you whole again, but in doing so, may decide to increase your insurance costs, even though you yourself have done nothing wrong. Tenant Liability coverage transfers the responsibility for these losses to the negligent party and reimburses your property carrier (up to the $60k limit of liability) for what they paid out for these tenant-caused losses. This goes a long way in helping to manage your loss history, avoid cost increases, and stabilize property insurance rates over time.  

Covered causes of loss include: 

  • Fire  
  • Explosion 
  • Smoke 

This coverage carries a $60,000 per location limit and a $500 deductible. 

*Note that losses in shared spaces determined to be caused by tenant negligence are subject to a $25,000 deductible under the property policy. 

Learn more about Rent-by-the-Room coverage here.

If you have questions regarding insurance for rent-by-the-room properties, feel free to contact an NREIG Sales Advisor or your Client Service Advisor. 

Note: This piece is not to be construed as contractual. Applicable language specific to your policy supersedes it. Information contained in this post is intended to provide you with a brief overview of the coverages provided for reference purposes only. It is not intended to provide you with all policy exclusions, limitations, and conditions. Coverage availability and cost for all properties is subject to underwriting review. Review the policy for coverage details.