# House Insurance



## investordude (Dec 14, 2012)

Hi Guys,

I'm shopping for home insurance and was wondering if any of you have come across this situation.

One of the insurance agents asked if I was renting any part of the house, for which I said yes. I'm renting the basement to my father-in law but it's not setup as a rental unit, just a living room and a bedroom. My father-law travels 6 months out of the year and he was recently divorced so it just so happened that living with us is the best option. 

Now to my question, the insurance agent said that I have to make sure that the basement is a legal apartment but not sure why. This is not a typical tenant/landlord thing. It's family and my father in-law so happens to pay rent to help us out.. Anyway, the insurance agent said that I would have problems in event of a cliam if there was an issue that was caused in the basement.

I find this hard to believe. If my father in-law wasn't paying rent, it would be just another family member living with us... so why all the red flags? Has anyone come across this or is this agent full of %^&!

Thoughts?


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## Mukhang pera (Feb 26, 2016)

I suspect the agent is concerned about liability issues. 

To be "legal", a suite in a house usually must be in a house in an area zoned for secondary suites and then there are building code and local bylaw compliance issues that go along with that. Such premises generally must pass an inspection. 

Let's say you create a suite and it does not meet the electrical and plumbing requirements to be legal. It never gets inspected. Let's say you have a gas or electric stove or some other cooking appliance down there and it causes a fire. That is one example where the insurer might get balky about paying a claim. I know you have said, in effect, there is no kitchen, but that does not mean dad-in-law won't plug in a microwave oven or coffee maker and overload a circuit and start a fire. Or he could be injured on the premises and sue for damages and you would be looking to your liability coverage.

In short, a number of issues come to mind and my take on it is that the agent is not simply blowing smoke.


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## Synergy (Mar 18, 2013)

I think your agent is out to lunch! Run Forest, run! What you appear to be describing is a roomer or boarder occupancy - shared living quarters. NOT landlord - tenant. However, the insurance company will want to be compensated for the added risk / exposure, normally in the form of a policy surcharge. The roomer or boarder may also need some form of contents insurance. Most homeowners packages allow for up to 2 roomers or boarders. I wouldn't call it a red flag, maybe just a yellow flag. It doesn't really matter if the individual is paying rent or not. More than one family living in a single family residence is an added exposure for the insurance company.


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## investordude (Dec 14, 2012)

Yes, I can understand this but it's finished basement with a living room and bedroom room. a finished basement that was done by the builder so it's up to code. So, if he wasn't paying rent and a fire was caused, they would accept my claim? It's only when I collect rent it's a problem? doesn't make sense to me.


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## investordude (Dec 14, 2012)

Thanks Synergy.


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## Mukhang pera (Feb 26, 2016)

I'll stand by what I said.

I do not think the insurer will much care how the relationship might be characterized - roomer; boarder; landlord/tenant; licensor/licensee, etc. In the end, the insurer wants to receive a premium commensurate with the risk. I would expect some insurers not to care at all about legal v. illegal suite, as long as its details are disclosed and the rate set accordingly. But I would expect some not to want to get involved in insuring premises where the use of the premises, or a portion, is not a lawful conforming use.

In any event, what did the agent say when confronted with Synergy calling bs? Did he/she roll over and give in? Did you seek out a different agent/insurer? Just curious. It would seem that, in the end, seeking opinions here won't get you far. Why not ask the agent why you are being told the suite must be legal? If not satisfied, request confirmation from the underwriters. The right to make the final decision as to acceptance of the risk is not vested in the members of this forum.


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## Spudd (Oct 11, 2011)

If the rent he's paying is below market rate, CRA doesn't consider it as rent per se. They consider that he's just kicking in some bucks to help with the mortgage. If that's the case here, I would think you can tell the insurance company you're not renting out any part of the building and it would be verifiable by your tax returns. 

http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-e.html#P560_53022


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## Synergy (Mar 18, 2013)

No need to complicate the situation. Simply tell the insurer, agent, broker, etc. that your father in law will be renting a room in your home. Pay the applicable policy surcharge, if any. Recommend your father in law to purchase a tenants package to cover his contents, liability, etc. Peanuts, the added cost on a homeowners policy shouldn't be anymore than $25-50 per year. Your father in law can pick up a tenants package from the insurance company who insures his car. He'll get a multi-policy discount. The discount on his auto will come close to covering the costs of the tenants insurance:biggrin:


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## Mortgage u/w (Feb 6, 2014)

Yeah, I wouldn't consider your father in law to be a renter/tenant. Your home does not seem to be set-up as a 2 unit home so it should not be a concern. Change insurance company or re-explain the situation. You simply have a family member living with you - not a tenant.


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## djkelly (Feb 18, 2016)

Your answer to the agent was incorrect: you're not renting. Unless the unit is a legal secondary suite and you're declaring the rent as income on your taxes then you just have a family member living in the basement who contributes some to the mortgage.


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## carverman (Nov 8, 2010)

djkelly said:


> Your answer to the agent was incorrect: you're not renting. Unless the unit is a legal secondary suite and you're declaring the rent as income on your taxes then you just have a family member living in the basement who contributes some to the mortgage.


This would be my take on it as well. If my mother/brother/sister/child wants to share accommodation with me and help me with the expenses..that is none of
the insurance companies business!


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## Synergy (Mar 18, 2013)

^ You can still "rent" a room in your home to a family member, stranger, etc. and NOT have to build an apartment suite. And, if you're sharing living quarters such as a kitchen and / or bathroom, etc. this arrangement will not fall under the landlord tenant act.


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## Synergy (Mar 18, 2013)

Having more than one family living in the home (brother, relative, etc.) increases the insurance companies exposure so yes, it is there business to some degree. Similar to having more drivers in a household who may drive your car. They need to be listed or excluded on a policy. At least this seems to be how things are in Ontario.


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## investordude (Dec 14, 2012)

Just want to add, that the rent that he's paying is about $100 - $200 below market value so not a small amount. I am planning to declare this as income; this actually works out well for my father in-law for his taxes as he collects a pension. So, if the insurance company knows that I'm collecting "rent" but to a family member, does that mean that I need a legal apartment? It seems like a grey area....


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## Synergy (Mar 18, 2013)

^ No need for a legal apartment suite IMO. You are renting a room in your home and sharing living quarters. This is okay whether it's a relative or stranger. At least this is how things appear to work in my neck of the woods. I would be surprised if it's any different across Canada. 

I checked my policy. The "insured" means the persons named as insureds on the declaration page and while living in the same household: his or her spouse, the relatives of either, and any person under 21 in their care. In essence your relative is covered under your policy. However, the insurance company will want to know how many families (anyone outside your immediate family) are living in the household. A small surcharge may apply for a roomer, boarder, additional named insured, etc. 

I would search out another agent or broker and get some proper advice. Depending on the province, insurance company, etc. wording and rules may vary.


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## OhGreatGuru (May 24, 2009)

I agree with djkelly, don't refer to it as a rental. You have an informal agreement with a family member to share living expenses, but he is not a 'tenant' in the normal meaning of the word. 

Just tell an agent your father-in-law also shares the household (6 months of the year, if that is relevant), and you want to make sure he is included as an insured person on the policy.

To me, this is no different than having an adult child who finally gets a steady job after university, and you tell him "Dear, we are happy to let you continue living in the basement, but now that you have an income, we expect you to contribute $X/mo. to our food and housing costs." It doesn't make his room(s) a "rental unit".


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