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Must-knows about in-law apartments and home insurance

An in-law apartment can raise the property value of any home, which benefits both the buyer and the seller, however, depending on the intended use of the space, homeowners insurance may or may not be enough coverage.

In-law apartments defined

In-law apartments or in-law suites are common in multi-generational households. They are often built to accommodate aging parents or in-laws, while maintaining privacy for both parties. An in-law apartment — a loose term — can be anything from a private bedroom and bathroom to a detached guest house on the property.

Accessory Dwelling Unit

While the term “in-law apartment” isn’t concrete, it may also be called an accessory dwelling unit (ADU). An ADU is an in-law suite that functions independently of the primary residence. It must have its own entrance, kitchen (or kitchenette) and bathroom. The terms in-law suite and accessory dwelling unit are used interchangeable by many, so it’s important to know which a homeowner actually has, especially when it comes to insurance.

If a homeowner is building a new dwelling that will function as an ADU, they should keep in mind that it may impact the new value of the home. Working with a reputable contractor and builder will help the homeowner gain an idea of the new property’s value. The homeowner can also research existing homes with accessory dwelling units to get an idea of the renovated property’s new value.

What’s covered under homeowners insurance?

Each homeowners insurance policy is highly subjective and varies by insurance company and specific policy. An insurance company will first want to establish whether a home qualifies as a single-family or multi-family home. If the property is a single-family home, and the in-law suite is occupied by a relative, they are both covered under home insurance.

If the property is deemed a multi-family house, it’s likely that, although the building structure will be covered, anything inside won’t be. For this reason, we encourage in-law occupants to have renters insurance (even if they aren’t paying rent). This insurance covers their property and valuables and provides them with personal liability coverage.

Factors that influence a insurers decision include whether:

  • The dwelling is occupied by a relative
  • Rent is being paid
  • The space has independent utilities
  • The space has its own address

Insuring an In-Law Suite

There are a few types of in-law suite coverages:

  • Renters insurance will protect a renter’s property if damage occurs.
  • If a renter has an accident on the property, liability insurance will help pay for injuries or property damage.
  • With a blanket coverage policy, all buildings and structures on the property are included.
  • When insuring a detached in-law suite with individual structure coverage, each building or structure is under a different coverage.

Renting out an in-law apartment

Renting out an in-law apartment is a great source of additional income. This may have an effect on a homeowners insurance policy, so it’s important to check. Renting is classified as a business activity, so a traditional homeowners policy may not provide enough coverage. As mentioned before, anyone living in an in-law apartment should have renters insurance, even if they are not paying rent. This covers personal belongings and can help cover the cost of structural damages. 

FAQs for real estate professionals

Q: Our home has an in-law apartment. Do we and our parents need two separate insurance policies?

A: That depends. If your home is deemed a two-family home, then yes, you will need two separate insurance policies. If your in-law apartment doesn’t have a separate entrance, then it can be covered under the same homeowners insurance.

Q: Is my in-law apartment going to increase the value of my home?

A: An in-law apartment will generally increase the value of a home.

Q: How do I know if my in-law apartment is separate from my house or not?

A: If your in-law apartment has a private entrance, kitchen and bathroom, then it is considered separate from your house.

Q: Do I have enough dwelling coverage?

A: With most home insurance policies, additional structures on your property are covered up to 10% of the main dwelling coverage limit. If you have $800,000 in coverage for your home, in theory, you’d have up to $80,000 in coverage for other structures outside.

Jackie Howard is with C&S Insurance.

This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.

To contact the author of this story:
Jackie Howard at

To contact the editor responsible for this story:
Tracey Velt at