In today's economy, having a roommate may seem like an ideal
solution for a stretched budget.
Your main concern about roommates may be whether they can pay
their share of the household expenses, or if you'll get along with
them. However, before taking that step you should consider how
having a roommate may affect your auto, homeowner or
Talk to your insurance agent
Talk to your insurance agent before you take on a roommate. You
might be surprised what you learn.
"Depending on the company's underwriting guidelines, listing a
roommate on the policy can increase the premium or require a
different type of policy," says Wendy Blitstein, director of
underwriting at Security First Insurance in Florida.
If your roommate causes a loss and you have not told your
company about him or her, your coverage could be in jeopardy. Not
all policies include liability or personal property coverage for
"Many companies will require that you purchase an additional
policy for each roommate," Blitstein says. "Our renters policy
provides comprehensive coverage, liability and personal property
for each roommate at a flat rate of $50 per roommate."
Numbers matter. If you own a home and add one or two roommates,
there is usually no problem. However, if you add three, your
carrier may refuse to insure you, says Frank Darras, founding
partner of DarrasLaw in Ontario, Calif., which specializes in
Roommates can be risky
More roommates mean more exposure for the owner. For example,
roommates may own a dog. "Be aware [that] even if it's not your
pet, you may be sued if a guest is bitten because you knew or
should have known of the pet's propensity to bite," says
Know definitions for terms in your policy. For renter's
insurance and personal liability, know how the insurance company
defines an "insured." Your policy may be limited to you, your
relatives or a person in your care up to a defined age (such as age
24). Some policies may also cover a "domestic partner," says Jon
Grandelis, personal insurance manager at Woller-Anger & Co. in
Elm Grove, Wis.
Separate is better. Each roommate should have his or her own,
separate policy. "Their stuff isn't covered under your policy,"
says Kevin Lynch, an assistant professor of insurance at The
American College in Bryn Mawr, Pa.
Roommates driving your car
Auto insurers want to know about all the members of your
household who drive, but you may not have to add a roommate to your
auto policy. You can give anyone permission to drive your car, on
an infrequent basis, without listing them on your policy. Only
someone with "frequent and regular access to your car" needs to be
added, says Lynch.
Insurers want information on all household members to ensure
proper pricing. But if a roommate is not disclosed or listed,
there's still coverage if he or she crashes your car and is defined
as a permissive user at the time of a loss, says Grandelis.
However, some insurers will pay out only the state's minimum
coverage when a permissive user is operating your vehicle. This is
known as a "step-down provision." Because state minimum auto
liability limits are never adequate, says Lynch, talk to your agent
to make sure you have proper coverage for your financial
circumstances. CarInsurance.com has more about
states with step-down provisions
If you need to add a roommate to your policy, the cost could be
significant. The final bill will depend on their driving record and
-- in many states -- credit history. It's another reason to choose
your roommates wisely.
Even if you get insurance matters squared away, choosing the
wrong roommate can make your life difficult.