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July 7, 2018

Will Your Homeowners Policy Cover Someone Renting Your In-Law Unit?


An in-law unit is a great way to house more than one generation in your home. But ultimately, it gets confusing when you’re trying to use your homeowners insurance to cover it.

In-law apartments are a tricky situation. It’s a little home within a home. But is it a “separate dwelling” within your home or on your property? The answer to this question dictates the extent of your coverage. It also depends on which insurance company you ask. These guidelines will help you determine if your homeowner’s policy will cover someone renting your in-law unit.

Legally, an in-law apartment is called an accessory dwelling unit. It’s an additional and separate living space located on a property where typically only one unit exists. Generally, in-law unites are added after a home’s original design. They’re also becoming way more common in the US—up 30 percent from 2000 to 2010.

Family Restriction

The first guideline you must define when talking about in-law units is defining the apartment by who resides in the space. Different cities have different rules to this. Typically, you need actual family to be living in the unit.

In Boston, for instance, it’s legally named an in-law unit because family lives in it. The Boston Globe defines it as “an accessory dwelling unit within a single-family dwelling subordinate in size … [that] may only be occupied by brothers, sisters, maternal parents and grandparents, paternal parents and grandparents, in-laws and or children of the residing owners of the principle dwelling unit.”

So, if you’re looking to keep someone other than family in the apartment, your homeowner’s policy most likely won’t cover it. In this case, it might be smart to compare renters insurance policies for your live-in guest, especially if it’s long-term.

Zoning

The zoning restrictions of the in-law unit are where things get a little tricky. Before undergoing construction for the unit, you should check with your local zoning ordinance to confirm that the apartment is in fact allowed. All zoning jurisdictions are different. You should carefully read over the construction provisions of your local zoning ordinance before building. If it doesn’t fit the requirements, you may have to look into other options. This might include writing your ordinance, asking for special permission, and definitely going with other insurance policies.

Structure

Furthermore, it’s considered an in-law unit as long as the structure of the apartment has a separate kitchen, bathroom, and living area. That’s pretty big. So, make sure you have the space for it as well as the time and money before you start building.

A typical structure for the space needs to be at least 800 square feet and have no more than one bedroom. However, as with zoning, these requirements differ based on your location. Look into your local provisions to check if your design fits the requirements. If it doesn’t, you’re not able to use your own homeowners policy for it, meaning you’ll have to look into renter’s insurance.

Community Impact

In addition to getting your zoning laws covered, your other primary concern should include how the in-law apartment impacts your community. Often, building this unit will bring along with it parking problems, increased traffic, and to some neighbors, poor aesthetic to the neighborhood.

Although housing this unit can be stressful, it may be worth it to have family or another renter under your belt. Just be sure to check with your city exactly what constitutes an in-law unit to see if your homeowners insurance will cover it.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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