"The lararium is in the house."
Translation:Lararium est in villa.
"Domus" means house/home, and is also used to refer to the city house for the ancient Roman upper-class. "Villa" specifically means the house for the upper-class in the countryside, literally the same as the English word.
So I think in cases where "villa" is used, "domus" should be accepted as well.
Especially in this case as a lararium is something you would find often in both the atrium of a Roman domus and a villa.
As is said above, domus generally referred to the town houses of the Roman élite and is perhaps probably the general word for "house" in Classical Latin. Villa, on the other hand, referred to rural properties which the Roman élite typically owned and was a good chunk of their income. Smaller rural properties were called casa, which more properly meant "hut, cabin," and smaller urban properties were the famous insulae.
It's that detail about in (and ad, as well) that they take a noun phrase in the ablative to mean "in" (or respectively "at") and take a noun phrase in the accusative to mean "into" (or respectively "to"). So in villam is "into the villa" which does not fit well with the verb sum, esse, fuī, futūrus which means "to be".
I also wrote "lararium domi est.
Researching, I found that the "lararium" (which is a place with pictures of God) was often in the "atrium" which is a kind of inside courtyard with a "light roof".
So, if the lararium is inside the atrium... we can consider that the lararium is not inside the house. It's a place almost outside. But "in the villa", yes. The house would be the bedroom, the kitchen, the living room. And the villa would be the whole package, the house + the courtyard(s). This way, the lararium could be in the villa and not inside the house.
P.S.: The software Grammarly, which helps me to correct what I write, does not recognize the word "lararium". Hi hi hi... (but google knows it)