New survey reminds homeowners of insurance ramifications of being landlords
Staff on August 3, 2017
Canadian homeowners who rent out part of their house to non-family members for extra income may be doing so illegally.A Square One Insurance Services Inc. survey finds that 17% of secondary rental suites, or ”mortgage-helpers,” don’t meet municipal regulations. The study finds that the top three reasons homeowners may rent out space in their house to non-family members is for the additional income (40%), to help with the mortgage (34%) or for companionship (14%).
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“We wanted to conduct this survey for two reasons,” says Daniel Mirkovic, Square One’s president, through a statement. “We’re noticing an increase in inquiries by house owners that are renting a portion of their home to non-family members. We wanted to understand what was driving this increase. We also wanted to understand how house owners are coping with municipal laws relating to rental suites in single-family homes.”
Some of those municipal regulations tend to include zoning restrictions; building code compliance; unit size restrictions; minimum parking requirements; and inspection and licensing compliance.
Though only 11% of the 5,500 house owners surveyed rent space in their homes to non-family members, 17% of those rentals in detached homes are illegal. Ontario has the highest number of illegal units at 21%, followed by B.C. at 15% and Alberta at 14%. Square One conducted the survey of more than 5,500 homeowners in those three provinces.
“According to the Canadian Mortgage and Housing Corporation, Ontario has more than 233,000 secondary rental units, British Columbia more than 155,000, and Alberta more than 125,000,” says the survey. Since 15% of all secondary rentals don’t meet regulation, that means more than 75,000 rentals in the three provinces aren’t legal.
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Square One’s study also provides a reminder to homeowners about the insurance ramifications of renting out part of a home:
Homeowners should understand that the addition of a rental suite will likely result in the increase of the property’s value. If homeowners do not inform their broker or insurer of this change, they may be underinsured in the event of a loss.
More people living in a home may mean an increased liability risk
The homeowner’s policy will not cover their tenant’s property or liability to others, which is why tenants should carry their own insurance
Homeowners who rely on rental income to help pay their mortgage should purchase insurance to protect against lost income during an insured event
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