What insurance do I need if I rent out my basement apartment?

If you're renting out your basement apartment, you'll need to upgrade from standard homeowner's insurance to landlord insurance, plus ensure your tenant has their own renter's insurance policy.

Converting your home into a rental property fundamentally changes your insurance needs and risk profile. Standard homeowner's insurance policies typically exclude coverage when you're operating a business (rental income) from your property. Your current insurer needs to know about the rental arrangement, as failing to disclose this could void your coverage entirely.

Landlord insurance covers the physical structure, your liability as a landlord, and loss of rental income if the unit becomes uninhabitable due to covered damage. This typically costs 15-25% more than standard homeowner's insurance but provides crucial protections like coverage for tenant-caused damage beyond normal wear and tear. In Ottawa, expect to pay an additional $300-800 annually depending on your property value and rental income.

Tenant insurance requirements should be mandatory in your lease agreement. While you can't force tenants to buy insurance, you can make it a lease requirement. Tenant insurance protects their belongings and provides liability coverage for damage they might cause to your property. Most policies cost tenants $15-30 monthly and protect both of you.

For secondary dwelling units in Ottawa, insurance companies will want to verify that your basement apartment meets Ontario Building Code requirements and has proper permits from the City of Ottawa. Unpermitted suites can be excluded from coverage or result in claim denials. Insurance companies may also require separate electrical panels, proper fire separation, and adequate egress windows - all standard requirements for legal basement apartments.

Additional considerations include umbrella liability coverage if you own multiple rental properties, and ensuring your policy covers short-term rentals if you're considering Airbnb-type arrangements (which require different coverage). Some insurers specialize in rental properties and may offer better rates than adding landlord coverage to your existing homeowner's policy.

Contact your insurance broker to review your specific situation, as requirements vary between insurers. Don't wait until after you start renting - update your coverage before your first tenant moves in to ensure continuous protection.

For guidance on creating a legal, properly permitted basement apartment that meets insurance requirements, Ottawa Basements can help ensure your renovation meets all Ontario Building Code standards and City of Ottawa requirements.