1. Forms
2. HO
3. HO-04-40

What the form is

The HO 04 40 Structures Rented To Others – Residence Premises endorsement is designed to be added to a standard Homeowners insurance policy. Its primary purpose is to provide insurance coverage for structures located on the "residence premises" (the property where the main insured dwelling is located) that are rented out, or held for rental, to other individuals for residential use. Standard homeowners policies often contain exclusions or limitations for "other structures" (like guesthouses, carriage houses, or detached apartments) if they are rented to someone who is not a tenant of the main dwelling. This endorsement specifically buys back coverage for such scheduled structures, addressing potential gaps in both property and liability protection. The endorsement allows the insured to list each rented structure and assign a specific limit of liability to it.

Classes of business it applies to

This endorsement is applicable to homeowners who have separate structures on their property that they rent out for residential purposes. Examples include:

• A homeowner who rents out a detached garage apartment on their property.
• An individual with a guesthouse or cottage on their residence premises that is leased to a tenant.
• Properties with a carriage house converted into a rental unit.

The key is that the rented structure must be on the same premises as the insured's primary dwelling and used for residential living, not for commercial or business operations (other than being a residential rental).

Special considerations

• Scheduled Coverage: Each structure rented to others must typically be specifically described in the endorsement, along with a designated limit of liability for that structure.
• Occupancy Limitations: Some versions or company interpretations may have restrictions on the number of families or roomers/boarders within the rented structure (e.g., not more than two families).
• Modifies Exclusions: The endorsement amends the standard policy language that might otherwise exclude coverage for these rented structures under Coverage B (Other Structures) and related liability. The business exclusion in the policy is typically stated not to apply to the scheduled rented structures.
• Landlord's Furnishings: Coverage for furnishings owned by the landlord within the rented structure might be limited (e.g., a common sub-limit is $2,500 and may only cover certain perils or exclude theft).
• Theft Limitations: There might be specific exclusions or limitations related to theft of property from the rented portion of the premises, especially for certain types of valuable items.
• Not a Full Landlord Policy: While it provides crucial coverage, it's an endorsement to a homeowners policy, not a standalone dwelling property (landlord) policy. The underlying homeowners policy conditions and exclusions will still apply unless modified by this endorsement.

Key information for agents and underwriters

• Identify the Exposure: Agents should always inquire if clients are renting out any portion of their property, including separate structures, to ensure this exposure is properly addressed.
• Risk Assessment: Underwriters will need to evaluate the specific risks associated with the rented structure, such as its age, condition, type of tenancy (long-term vs. short-term, though this form is generally for more stable residential rentals), and adherence to safety codes.
• Adequate Limits: Ensure the limit of liability chosen for the rented structure is sufficient to cover its replacement cost or actual cash value, as per the policy terms.
• Clarify Coverage with Insured: Agents should explain any limitations, especially concerning landlord's furnishings and theft, so the insured has clear expectations.
• Distinguish from Home-Sharing: For very short-term rentals (e.g., Airbnb), while this form might offer a solution for a separate structure, specific home-sharing endorsements might be more appropriate if the rental is within the main dwelling or if the insurer has specific products for that exposure. HO 04 40 is generally for structures rented as a residence.
• Applicability: This endorsement can generally be used with most homeowners forms (like HO 00 02, HO 00 03, HO 00 05) but is typically not available for use with forms like the HO 00 08 (Modified Coverage Form) or HO 00 14 (Contents Comprehensive Form for tenants).
• Premium Impact: Adding this endorsement will result in an additional premium, calculated based on the limit of liability for the scheduled rented structure(s).