Insurance for vacation rental/primary residence hybrid

[Amir Bekhit]

Hello All,

I'm in the process of buying a primary residence. I am also considering renting out part of the residence through airbnb. My question is about how to correctly navigate homeowner's insurance. I am currently paying 5% down and everything will be paid through escrow.  I am afraid that if I start out with a business type homeowner's insurance it would raise flags with the lender and that a higher down payment would be required or issues would arise with the loan (I don't know for sure). Should I just start with a regular homeowner's policy and later switch to a business type policy? This is my first home and I just want to make sure I do this right so that I can rent out a room through airbnb, have proper coverage, and still be ok with my lender. Any advice/pointing in the right direction would be appreciated.

Thanks

[Chris Mason]

Originally posted by @Amir Bekhit:

Hello All,

I'm in the process of buying a primary residence. I am also considering renting out part of the residence through airbnb. My question is about how to correctly navigate homeowner's insurance. I am currently paying 5% down and everything will be paid through escrow.  I am afraid that if I start out with a business type homeowner's insurance it would raise flags with the lender and that a higher down payment would be required or issues would arise with the loan (I don't know for sure). Should I just start with a regular homeowner's policy and later switch to a business type policy? This is my first home and I just want to make sure I do this right so that I can rent out a room through airbnb, have proper coverage, and still be ok with my lender. Any advice/pointing in the right direction would be appreciated.

Thanks

 You're right to be concerned that it would raise a flag with the lender. Close with a normal vanilla policy, move in, get settled, and put "redo insurance" on your checklist to get it ready for part of it to be on airbnb down the road. No need to pay for a more expensive insurance policy from day 1 when you are probably at least a month away from actually having airbnb guests anyways, even if it wouldn't screw up the purchase transaction...