June 4, 2012
(Vancouver, BC): In the past 8 months, Square One Insurance has talked to over 850 BC house owners and has found nearly 25% of them rent out a portion of their home to non-family members. This could be a basement suite in the home, or a garage converted to a “coach house”. Square One’s findings reinforce a 2009 study completed by the City of Vancouver, which estimated between 23% and 27% of single-family houses have suites. Square One says that while mortgage-helpers are well, helpful, there are home insurance implications that house owners need to be aware of.
“The high percentage of people renting out a portion of their houses is understandable given today’s economy and the high price of real estate across the province,” says Daniel Mirkovic, Square One’s President & CEO. “In fact, we suspect the actual percentage is considerably higher. Some people may be reluctant to disclose this information to their home insurance provider if they haven’t secured necessary municipal approvals and permits.”
The rental income from your tenants can be a great help in paying off your mortgage. But if you’re considering renting out part of your home, be sure to discuss it with your insurance advisor first. A rental suite may or may not be allowable under the type of policy you have, and adjustments may need to be made in order for coverage to remain in place. Here are some things to keep in mind when you’re considering renting out a portion of your home:
If you built a rental suite in your home, you’ve likely increased the value of the property. Most insurance policies require you to advise them within a certain period of time of any improvements over a certain amount. If you fail to do this, you may find yourself underinsured in the event of a loss. Your insurance agent can help you determine the new replacement cost of your home.
Your home insurance policy likely requires you to advise your insurance agent if you are going to make any significant changes to the building, or to how it’s used. Your policy was sold to you based on the fact that it was a single family dwelling. If it becomes a two family dwelling, and if you neglect to advise your insurance agent, your policy could be invalid.
More people living in the home may mean an increased liability risk. If your tenant, or a guest of your tenant, trips on a ladder in your backyard, or slips on an icy step, you can be sued for their injuries. You may want to increase your liability coverage, and may pay a slightly higher premium due to the increased risk.
Your home insurance policy will not cover your tenant’s property, nor will it cover your own property in the unit, such as window coverings, appliances, or furniture in a furnished suite. You may need to add “landlord’s property” insurance to cover anything owned by you. And make sure your tenants carry their own insurance. This will cover their personal property, and it may cover your property, if they unintentionally damage your home.
A number of municipalities have changed their bylaws to allow the conversion of a garage to a coach house. The insurance on your garage will need to be upgraded to cover a secondary dwelling to protect it to its full replacement value.
If you’re counting on that rental income to help pay your mortgage, you should purchase insurance to protect you in the event that income is lost. If there is a fire or other insured loss, and your tenants move out while the property is being repaired, your insurance can replace the income you’ll lose while the property is uninhabitable.
Since more and more people are opting to create a rental space in their homes, it’s important to have the right insurance coverage in place. Always consult your insurance advisor to ensure you have the insurance coverage you require. For additional home insurance tips, visit www.squareone.ca.
-30-Established in 2011 and based in Vancouver, British Columbia, Square One Insurance provides Canadians living in urban centres with modern, relevant home insurance. Square One is one of the few providers in Canada specializing in home insurance and offering truly customized policies that can be purchased over the phone and online. For more information about Square One, visit our www.squareone.ca.