Quick answer: Basement apartment insurance in Ontario usually comes through your own home policy: a suite in the home you live in can be insured, but only if your insurer knows it is there. Tell your broker or insurer before you start building and again before a tenant moves in. Your policy generally covers the building, including the suite, and your own liability. Your tenant needs their own tenant insurance for their belongings and their liability.
Basement apartments are a big part of Ontario’s housing. Canada Mortgage and Housing Corporation (CMHC) estimated that in 2019, 15.4% of ground-oriented homes in Toronto had a secondary unit, as did 9.6% in Brampton and 7.4% in Mississauga. Basement apartments were the most common type. Since the More Homes Built Faster Act, 2022 received Royal Assent on November 28, 2022, Ontario has allowed up to three residential units on most residential lots without a zoning amendment. One example is a main house, a basement apartment and a garden suite.
This guide covers the insurance side of a basement apartment in a home you live in. It explains what your policy covers, what you must tell your insurer, and the safety rules that protect your tenant and your coverage. One of those rules is Ontario’s carbon monoxide alarm requirement, which took effect on January 1, 2026. If you own a separate rental property that you don’t live in, that usually calls for a different policy. Our rental property insurance page covers that.
Does home insurance cover a basement apartment in Ontario?
Usually, yes, once the suite is disclosed. Insurance Bureau of Canada (IBC) says home insurance policies generally cover boarders, roomers and tenants who live in secondary suites. The suite is insured as part of your home. Your tenant’s personal property is excluded. IBC adds that lost rent can be covered if the home becomes unlivable after an insured loss, provided you have additional living expenses coverage.
Here is how the two policies usually split the risks. Wording varies by insurer, so check your own policy.
| Risk | Your home policy (suite disclosed) | Your tenant’s policy |
|---|---|---|
| The building, including the basement suite | Yes | No |
| Your own belongings | Yes | No |
| Your tenant’s furniture, electronics and clothing | No, excluded | Yes, if they buy contents coverage |
| Lost rent after an insured loss | Only with additional living expenses coverage | No |
| Your tenant’s legal liability for damage or injury they cause | Not covered for your tenant | Yes, if they carry liability coverage |
| Your tenant’s hotel and meal costs if displaced | No | Only if their policy includes additional living expenses |
Why water coverage matters more in a basement suite
A basement unit sits right where water damage starts. IBC says sewer backup damage is covered only if you have bought specific, optional sewer backup coverage. Our guide to sewer backup coverage explains how the endorsement works. Ontario’s second-unit guide also says each unit needs its own water shut-off valve, and that a backwater valve may be needed in areas prone to flooding or sewer backup.
Do you have to tell your insurer about a basement apartment?
Yes. Ontario’s Insurance Act writes a set of statutory conditions into property insurance contracts. Statutory Condition 1, on misrepresentation, says that if you misrepresent or fraudulently fail to disclose a circumstance that is material to the risk, the contract can be void for the property it relates to. The statutory conditions also include a condition on material change in risk. Adding a rental unit is the kind of change your insurer would expect to hear about.
The Registered Insurance Brokers of Ontario (RIBO) tells consumers to update their broker and insurer about any material change in their circumstances. IBC also recommends that you tell your insurance representative before any major renovation begins. It adds that a secondary suite may increase your property’s value, which could raise your rates.
Contact your broker or insurer at four points:
- Before construction starts. A renovation in progress brings its own risks, and the finished suite raises your rebuild cost.
- When the suite is finished. Update the dwelling limit so it covers rebuilding both units.
- Before a tenant moves in. Renting to a paying tenant changes how the home is used.
- Whenever the use changes. For example, a parent moves out and a paying tenant moves in, or you start renting nightly.
Does a basement apartment need to be legal to be insured in Ontario?
Ontario’s guide is clear on permits. “To add a second unit in your house, you will need a building permit,” and you need “a separate electrical permit” for the electrical work, which the Electrical Safety Authority (ESA) inspects. Municipal inspectors check framing, insulation, plumbing and finishes at stages of the work.
Many suites skip that step. The City of Toronto’s fire safety guidance warns that renovations to add a secondary suite are often done “without required City review and approval.” Such suites can lack proper exits or interconnected smoke and CO alarms. Separate retrofit rules in Section 9.8 of the Ontario Fire Code apply to two-unit houses that existed on or before July 14, 1994.
Whether an insurer will cover an unpermitted unit, and on what terms, is an underwriting decision that varies by company. Two things don’t change. Disclose the suite honestly, and keep your building permit, ESA certificate and final inspection records. Lenders already ask for this paperwork. Since January 15, 2025, CMHC-insured refinancing has let owner-occupiers borrow up to 90% of a home’s as-improved value to add suites, and it requires a building permit plus an occupancy permit or a third-party compliance report.
What safety rules apply to a basement apartment in Ontario?
These rules protect your tenant first. They also cut the chance of the fire or water claim that would test your policy. Ontario’s second-unit guide sets out the main Building Code requirements:
- Fire separation: a 30-minute fire separation between units, or 15 minutes if the whole house has interconnected smoke alarms.
- Smoke alarms: alarms that meet the CAN/ULC S531 standard and have a flashing light. They go on every level, outside sleeping areas, in each bedroom of the second unit and in shared common areas.
- Exits: a separate exit is preferred. If one unit’s exit passes through the other, the second unit needs an escape window that meets the size rules.
- Shared furnace: allowed only with a duct-type smoke detector (UL 268A) that shuts the furnace down.
Carbon monoxide rules tightened this year. Since January 1, 2026, existing homes with a fuel-burning appliance, a fireplace or an attached garage need CO alarms on every storey, not just next to sleeping areas. In rental homes, the landlord is responsible for meeting the Fire Code’s CO alarm requirements.
The Ontario government says that breaking the smoke alarm rules can lead to a $360 ticket, or fines of up to $50,000 for individuals and $100,000 for corporations. It is also illegal for tenants to remove alarm batteries or tamper with alarms.
The provincial second-unit guide was last updated in January 2023 and notes that it may not reflect the 2022 planning changes. Confirm current requirements with your local building department.
Should your basement tenant have tenant insurance?
Yes. Tenant insurance is the other half of basement apartment insurance, and you can make liability coverage part of the lease. IBC advises owners to make sure tenants carry tenant insurance for their belongings and liability. For non-family tenants, IBC says the lease should require legal liability coverage for a specified amount for the length of the tenancy.
Ontario’s standard lease allows for this. The government’s guide says a landlord and tenant “can agree whether the tenant must have liability insurance.” If the landlord asks for proof of coverage, the tenant must provide it. Contents insurance is the tenant’s choice. Our article on whether a landlord can require tenant insurance in Ontario covers the tenant’s side of that question. Point your tenant to our tenant insurance page if they need a quote.
Family member, tenant or short-term guest: who is covered?
Who lives in the suite affects both your coverage and the rules that apply.
| Who lives in the suite | What it means for insurance | Other rules to know |
|---|---|---|
| A direct family member, such as a parent | IBC says your policy covers the personal property and liability of direct family members, and of anyone under 21 in your care | Tell your insurer anyway. IBC notes that bylaws and safety rules apply whoever lives there |
| A long-term, non-family tenant | Your policy covers the building. The tenant needs their own policy, and the lease can require liability coverage | The Residential Tenancies Act does not apply if the tenant must share a kitchen or bathroom with the landlord |
| Short-term or nightly guests | IBC says that if you tell your insurer about the suite, it may cover it even when used for short-term rental | CMHC-refinanced suites cannot be rented for periods under 90 consecutive days. Check municipal short-term rental rules |
Basement apartment insurance checklist for Ontario homeowners
- Call your broker before construction begins.
- Get a building permit and an ESA electrical permit, and keep the final inspection records.
- Update your dwelling limit to cover rebuilding both units.
- Review sewer backup coverage and its limit, and ask about a backwater valve.
- Ask whether your policy covers lost rental income.
- Check your liability limit now that someone else lives in the home. Our guide to personal liability coverage in home insurance explains how it works.
- Install and test smoke alarms and CO alarms, on every storey since January 1, 2026.
- Write tenant liability insurance into the lease and ask for proof every year.
- Report any change in who lives in the suite or how it is rented.
How an Ontario broker helps with basement apartment insurance
Adding a suite changes your rebuild cost, your water exposure and your liability all at once, and insurers treat those changes differently. RIBO says a broker has a duty to provide professional advice. You can confirm any broker’s licence on RIBO’s public registry.
AAXEL Insurance Brokers is an Ontario brokerage. If you are planning a second unit or already rent one, request a home insurance review before your tenant moves in. You can also read more about home insurance with AAXEL. If you are not sure whether you need a homeowner or a landlord policy, our explainer on how landlord insurance differs from home insurance covers properties you don’t live in. This article covers a suite inside the home you live in.
Frequently asked questions
How does basement apartment insurance work in Ontario?
In most cases, your home policy covers the suite, provided you have told your insurer about it. IBC says home policies generally cover tenants living in secondary suites and insure the suite as part of the home. Your tenant’s belongings are excluded, so they need their own tenant insurance.
Do I have to tell my insurance company I’m renting my basement?
Yes. Ontario’s Insurance Act includes statutory conditions on misrepresentation and material change in risk. RIBO tells consumers to update their broker and insurer about material changes. Failing to disclose a rental unit can put a claim at risk.
Will a basement apartment raise my home insurance premium?
It can. IBC says a secondary suite may increase your property’s value, which could raise your rates. Your rebuild cost also rises when you add a kitchen, bathroom and living space. Ask your broker to re-quote before construction so the cost is not a surprise.
Does my basement tenant need tenant insurance?
Your policy does not cover their belongings. IBC recommends that tenants carry tenant insurance for their property and liability. Under Ontario’s standard lease, you and your tenant can agree that they must carry liability insurance, and they must show proof if you ask.
Is lost rent covered if my basement apartment is damaged?
It can be. IBC says lost rent is covered if the home becomes unlivable after an insured loss, provided you have additional living expenses coverage. Confirm with your broker that your policy includes it and check the limit.
Do I need a permit for a basement apartment in Ontario?
Yes. Ontario’s guide says you need a building permit to add a second unit, plus a separate electrical permit with ESA inspection. Keep the paperwork, because insurers and lenders may ask about it.
What are the CO alarm rules for a basement apartment in 2026?
Since January 1, 2026, existing homes with a fuel-burning appliance, fireplace or attached garage need CO alarms on every storey and next to each sleeping area. In rental homes, the landlord is responsible for meeting the Fire Code’s CO alarm requirements.
Is a parent living in my basement covered differently from a tenant?
Yes. IBC says your home policy covers the personal property and liability of direct family members. A non-family tenant needs their own policy, and the lease should require liability coverage. Tell your insurer about the suite in both cases.
Can I rent my basement apartment on Airbnb?
Check with your insurer first. IBC says that if you tell your insurer about the suite, it may cover it even when used for short-term rental. Municipal short-term rental rules also apply, and suites financed through CMHC’s secondary suite refinancing cannot be rented for under 90 consecutive days.
Sources
All pages were opened and read on November 3, 2026.
- Insurance Bureau of Canada: Making room for mom? Here’s how an in-law suite could affect your home insurance (December 11, 2024): what a home policy covers for tenants and family, lost rent, disclosure, tenant insurance in the lease, short-term rental, effect on rates
- IBC: Flooding and insurance: sewer backup is optional coverage
- Government of Ontario: Add a second unit in your house (updated January 30, 2023): building and electrical permits, fire separation, smoke alarms, exits, water shut-off, backwater valve, furnace
- Government of Ontario: More Homes Built Faster: up to three units on most residential lots; Royal Assent November 28, 2022
- Government of Ontario: Fire safety at home (updated September 25, 2026): smoke alarm law, landlord responsibility, fines
- Office of the Fire Marshal: Carbon Monoxide Alarm Rules, Existing Homes (December 2025): CO alarms on every storey from January 1, 2026; landlord responsibility
- Government of Ontario: Guide to Ontario’s standard lease (updated October 27, 2025): tenant liability insurance and proof of coverage
- Landlord and Tenant Board: A Guide to the Residential Tenancies Act: RTA does not apply when a tenant shares a kitchen or bathroom with the landlord
- City of Toronto: Two-Dwelling Unit Houses (Basement Apartments): Fire Code Section 9.8 scope and common risks in unapproved suites
- CMHC: Secondary units in Ontario: the numbers and what contributes to disparities (June 2, 2021): share of homes with secondary units by municipality
- CMHC: Refinance for building secondary suites: permit requirements, owner occupancy, 90-day minimum rental
- Department of Finance Canada: Mortgage insurance rule changes to enable homeowners to add secondary suites: January 15, 2025 effective date, 90% limit, $2 million cap, four units
- Ontario Insurance Act, R.S.O. 1990, c. I.8, s. 148 (Statutory Conditions): misrepresentation and material change conditions
- RIBO: Consumer rights and expectations: reporting material changes, broker duties, licence registry
Disclaimer
This article is general information about insuring a basement apartment or second unit in an owner-occupied Ontario home, current as of November 2026. It is not legal advice or advice about your policy. Coverage, exclusions and eligibility vary by insurer and policy wording, and building, fire and zoning rules vary by municipality. Speak with a licensed broker about your policy, and with your local building department about permits, before you rent out a second unit.
