Does home insurance cover secondary suites?

Families in Canada frequently rent out a basement or secondary suite to help cover mortgage costs and make a bit of extra income. But does your home insurance company know you have a renter? If not, your policy could be null and void. And, as it turns out, there are benefits of letting your insurance provider know about the extra suite — regardless of whether that suite is legal.

Is a secondary suite legal?

Not all secondary suites comply with municipal bylaws. In fact, there are fewer than 7,000 registered secondary suites in Calgary; however, the illegal inventory is estimated to be in the tens of thousands. For that reason, many homeowners may be reluctant to disclose the unit to their home insurance provider.

Even if the suite does comply with local regulations, some homeowners may not report the suite for fear their home insurance rates may rise.

Should you tell your insurance company if you have a secondary suite?

If your insurance provider doesn’t know about the suite, it may fail to cover you for damage connected to the unit. It may also make the entire policy null and void. That means if you put in any claim, you won’t have the protection you need. But if your insurance provider can properly assess the risk associated with a secondary suite, they can provide you with the right policy. In addition, you won’t have to worry about claim denial because you failed to disclose the suite.

According to the Insurance Bureau of Canada, the change in risk isn’t just about the unit. Your individual renters also pose different kinds of risks. So, it’s a good idea to chat with your home insurance company any time your tenant changes.

What home insurance covers when it comes to rental suites

Your home insurance policy may cover damage that results from the rental suite. For example, if a pipe bursts in the rented space, your homeowner’s policy may cover the resulting damage.

Depending on the policy, you may be able to get compensation for lost rental income if your suite is vacant because of an insured peril. That’s a benefit you would not get if you didn’t tell your insurance provider about the person living in your home. 

Protecting your tenant

Encourage your renter(s) to purchase tenant insurance, as their material losses and liability will not fall under your home insurance. For this reason, some insurance providers require renters to have liability coverage.

Sharing your home with a tenant can make financial sense but ensure you protect your investment with the appropriate insurance for your situation. It is also beneficial to register your secondary suite to avoid fines from the municipality. Often, the registration is a one-time fee.

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