Should I Invest in a Granny Flat?
You recently purchased a new home with a good amount of yard space, but you’re not sure what to do with it. Do you build a shed to store some of your belongings? Do you set up a trampoline or build a pool for the kids? Or do you add on a granny flat for some extra living space and income potential? Many homeowners, especially in newer homes, wonder if a granny flat or housing a renter is worth it when it comes to a higher home insurance policy deductible, but there are many positives as well.
From an insurance perspective
The first thing a homeowner needs to consider if planning to invest in a granny flat is how it might impact homeowner insurance. It’s possible you may be able to bundle it with your homeowners insurance company and even include auto insurance. Depending on your existing insurance products, this might not have a massive impact on your deductible. But if you have a more restrictive homeowners policy, you may find that the amount of money required for a deductible is more than you’d like. The deductible is only part of what you need to consider when you’re going over your home insurance rates. Depending on your needs for your possessions and personal property, your monthly premium could be variable.
An insurance agent can walk you through some of the finer details of your home insurance rates, including which insurance products are most applicable for you as a policyholder. In some cases, you may be able to negotiate a lower rate but, often, a lower rate means high risk when it comes to the coverage your insurance provides. You should also discuss how your homeowner insurance policy works if you’re in an area that is prone to natural disasters such as earthquakes, hurricanes, and floods. Flood insurance can bump up your premiums so it’s important that your insurer walks you through your options.
Now, this is one thing if you’re using the granny flat for yourself. If you’re going to take on a renter, there are a few more things that you need to consider, including the aforementioned higher deductible.
From a rental perspective
In today’s market, renting is a great way to bring in extra income. Even if you aren’t able to secure the cheapest rates for your insurance, you may be able to increase the market value of your home. There are a few things you’ll have to keep in mind, not the least of which is liability coverage. Especially in a disaster-prone area, taking on a renter can mean a fairly high home insurance policy, even with the added rental commission. Plus, you know that you’re not likely to destroy your own property, but what about someone who is renting?
On top of that, you need to ensure that the granny flat is secure. This means having storm shutters, a functional smoke detector, deadbolts on the doors and, in some cases, a security system. While a home security system isn’t always necessary, some insurers will be keener on lowering your premium if they see that you’ve taken the steps to protect yourself and your tenant from property damage. On occasion, this means the insurer will require separate policies so you should discuss what level of dwelling coverage you need and the lowest prices available.
Finding cheap home insurance isn’t always easy. Comparing standard policies, lower premiums, and possible exclusions can be overwhelming and sometimes you need an intermediary of a helping hand. To weigh policy offerings and see which insurance companies get the top scores nationwide, compare home insurance policies with iSelect.