The ADU Boom Nobody’s Insurance Policy Kept Up With
Denver has made it significantly easier to build an accessory dwelling unit over the past several years, whether that’s a converted garage, a backyard cottage, or a basement apartment with its own entrance. What the city’s zoning changes didn’t automatically update was every homeowner’s insurance policy.
Ask Yourself These Three Questions First
- Is the ADU attached or detached from the main house? Attached units are often treated as part of the main dwelling. Detached units, like a converted garage or standalone cottage, are frequently classified separately and may need their own coverage line.
- Is anyone living in it, and are they paying rent? An ADU used by family members rent-free is a very different insurance conversation than one rented out to a tenant. Rental use typically shifts part of the coverage into landlord territory.
- Was it built with a permit? Unpermitted construction can create real problems at claim time, since insurers may deny coverage for structures that weren’t legally built or inspected.
Where Coverage Gaps Tend to Show Up
A standard homeowners policy typically extends some coverage to “other structures” on the property, but that allowance is often a percentage of the main dwelling’s coverage, sometimes not enough to fully rebuild a livable ADU. Personal property inside the unit and liability if a tenant or guest is injured there both need direct attention too, not an assumption that the main policy stretches to cover it.
What Renting the ADU Changes
Once money changes hands, even informally, the insurance conversation shifts. A landlord policy or specific rental endorsement typically becomes necessary, since a standard homeowners policy generally isn’t built around income-generating property.
Getting This Right Before, Not After
Siegfried Insurance Group works with Denver homeowners to review exactly how an ADU changes their coverage needs, whether it’s a mother-in-law suite or a fully rented unit. Reach out through Siegfried Insurance Group before construction wraps up, so your policy is ready the day someone moves in.
