Do You Need Landlord Insurance for a Basement Suite or Rental Unit?
Learn when a rental unit in your own home requires separate coverage and what risks it helps manage
Turning a portion of your home into a rental unit, such as a basement suite, is a smart way to generate extra income. But even if you still live in the home, renting out part of it changes your exposure—and your insurance needs. Many homeowners are surprised to learn that their existing policy might not protect them when they take on tenants.
This matters when damage, legal issues, or tenant disputes arise. You might consider this the next time you list your basement suite online or draft a rental agreement.
Why Your Standard Home Insurance May Not Be Enough
When you rent out part of your home, you take on new risks. Your policy was designed for owner-occupancy, not for commercial or income-generating activities. If you don’t inform your insurer, and an incident occurs involving your tenant or their guests, your claim could be denied.
Insurers often classify even a single rental unit as a significant change in use. This may require an endorsement to your current policy or a shift to a landlord or hybrid policy, especially if:
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The suite has its own kitchen and entrance
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Tenants have exclusive use of a portion of the home
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You advertise the unit publicly or rent it out regularly
What Landlord Insurance Covers in This Case
Landlord coverage for an in-home rental unit may include:
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Property damage to the rental portion of your home
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Liability protection if a tenant or their guest is injured in their unit or shared space
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Loss of rental income if the suite becomes unliveable after a covered event
| Scenario | Is It Covered Under Standard Home Policy? | What You Might Need |
|---|---|---|
| Occasional roommate | Often yes | Disclosure still recommended |
| Legal basement suite with tenant | Often no | Landlord or rental endorsement |
| Self-contained unit with separate entrance | No | Full landlord coverage recommended |
Tip: Even if you live upstairs, renting out a legal suite can legally and financially position you as a landlord. Your responsibilities go beyond just collecting rent.
Know Your Local Rules
Many municipalities require permits or inspections to make a rental unit legal. Insurers may ask for proof that your basement suite complies with fire codes, has separate ventilation, and meets occupancy limits. Failing to meet these standards could not only void your policy but also put you at legal risk.
Caution: If a fire starts in your tenant’s kitchen and spreads, and your insurer was never notified that part of the home was rented, they may deny your entire claim.
Landlord insurance is not just for apartment buildings. If you rent out a part of your home, even casually, the right policy helps you protect your property, maintain your income, and handle unexpected situations with confidence.