Home insurer Square One Insurance says it has been fielding so many recent calls about laneway homes — most of them in Vancouver — that it’s started offering a separate product created specifically for the structures.
Converting a back alley parking garage into a residential structure is one way for homeowners to offset the cost of pricey real estate by generating rental income. However, not all Canadian cities allow for laneway homes to be built.
Vancouver is a notable exception. The city has issued over 1,000 permits for laneway homes since 2009.
Currently, most insurance companies cover laneway homes under the same policy as the main property and don’t offer a separate insurance policy for the structures.
Daniel Mirkovic, Square One Insurance’s president and CEO, told The Canadian Press that could be problematic in certain circumstances — for example, if a natural disaster occurs that affects both the main structure and the laneway home. In the aftermath of such incidents, building replacement costs may soar due to a phenomenon referred to as “post-event inflation.”
In that situation, Mirkovic says, “the demand to build new homes or rebuild homes has gone up dramatically because there are thousands of people who need to rebuild their homes, and the supply is low. There’s only a certain amount of building supplies readily available; only a certain amount of contractors who can build homes.”
Realtors in Vancouver seeing a growth in the popularity of laneway housing are being warned by some insurers that current insurance practices may not be sufficient.