Insurance is never secondary, especially for secondary suites

2 minute read Published on Sep 7, 2016 by BrokerLink Communications

Renting out a secondary suite in your home can be a great way for a homeowner to supplement their mortgage payments while providing renters with affordable housing. Whether you are renting out a secondary suite in your home or renting one yourself, there are important insurance factors to consider.

What is considered a secondary suite?

A secondary suite is a private, self-contained living unit within an existing home. The most common example of a secondary suite is a basement suite.

Is insurance important for secondary suites?

What happens if a tenant starts a fire in the basement suite they are renting? Will the homeowner’s insurance policy cover the cost of damages? What if it is the homeowner who starts a fire and damages the tenant’s belongings? This is where insurance becomes vital.

Homeowners: let your broker know about your secondary suite

As a homeowner, if you did not notify your insurance company that you are renting out a secondary suite in your home or on your property, your home insurance policy could become void when you try to file a claim.

For example, if your tenant starts a fire in their suite, your insurance policy may not cover the resulting damages. This means that you would be responsible for the entire replacement cost, paying out of pocket for damages to the property, including appliances.

Add Loss of Rental Income Coverage

Many insurance companies offer loss of rental income coverage for an additional fee. Under this coverage, you may be eligible to receive financial support from your insurance company should your secondary suite become uninhabitable following an incident.

For example, if sewer backup damages your secondary suite and made it uninhabitable for a period of time, loss of rental income coverage could assist you. Your insurance company may provide you with supplementary payments equivalent to your monthly rental income until your secondary suite can be rented out again.

Increase Your Liability Coverage

We recommend homeowners increase their liability coverage when renting out a secondary suite. An increase in household residents also means an increased number of residents who could injure themselves on the homeowner’s property. For example, a tenant who slips and falls on the homeowner’s driveway may decide to sue.

Why tenant insurance is important for both homeowners and tenants

For the benefit of both parties, tenant insurance is highly recommended. For example, if a tenant causes a fire, their insurance coverage will be utilized to cover damages for certain perils, as opposed to the homeowner’s insurance. Additionally, if a homeowner causes a fire and their tenant’s belongings are destroyed, these belongings will only be covered by insurance if the tenant has tenant insurance.

How do illegal suites affect insurance?

A legalized secondary suite means the suite has passed all safety requirements and residential restrictions within its municipality. Insurance companies will not ask for verification to confirm if a homeowner’s secondary suite is legal or illegal. However, a claim can be denied if it is deemed that damage occurred due to homeowner negligence.

Homeowners are encouraged to have their secondary suites inspected to bring to light any deficiencies or safety hazards. If a tenant is harmed while escaping a fire because the homeowner did not ensure proper fire escape routes, the homeowner could be sued or face criminal charges. Therefore, it is always in the best interest for everyone involved for a homeowner to ensure their secondary suite has met municipal regulations and is fire safe.

Call your broker

As with all living conditions, you never know what could come your way. Whether you are an owner or a tenant of a secondary suite, ensure you have proper insurance coverage in place. Contact your BrokerLink broker so you can have peace of mind knowing you have taken steps to protect yourself and those around you.