Guide to insurance for granny annexes and conversions
There is something of a tradition in many British homes for a so-called “granny annexe” to be added. Typically, this is a self-contained unit of accommodation, built either as an extension to the main house or even a separate structure within the grounds of the property.
Just as the name suggests, this has generally been used as somewhere for an ageing member of the family to live as independent a life as possible, yet still within a safe distance for any extra help and care whenever that might be needed.
But the principle of using an extension, conversion or separate annexe has developed a wider appeal, as many homeowners have discovered the advantages of incorporating additional living space into their properties – for example, not only for use by other members of the family, but also as a potential source of extra income, either through rental to tenants or on shorter-term holiday lets – or even to take advantage of the opportunities presented by the latest craze for Airbnb.
This guide suggests some of the important reasons for ensuring that any such annexe, extension or conversion of your main home is adequately protected by specialist self-contained annexe insurance.
What is an annexe?
The Cambridge English Dictionary offers a simple and straight forward definition of an annexe: an extra building added to a larger building. In other words, it might be an extension or conversion of the existing building or be a free-standing structure, on its own, but in the same grounds as the main building.
In either case, when considering the need for insurance of this additional unit of accommodation, there are some important distinctions to be taken into account – principally in terms of whether it is a self-contained unit or one in which basic facilities continue to be shared with the principal home owner:
although any annexe, conversion or extension to your own home might include extra rooms which may be used as sleeping accommodation, a sitting area or other space, amenities such as a toilet, bathroom or kitchen might continue to be housed in the main building and shared with its owners;
if this is the arrangement that suits you, and the facilities within your own home continue to be shared, it is important to remember that the occupants of the annexe or additional unit of accommodation are typically lodgers and not tenants;
the distinction is an important one to draw – not only because of the various laws defining your responsibilities and obligations to tenants and lodgers, but also because of the way insurers regard the two groups;
if you are sharing the facilities of your own home, for example, you still need to keep the property in a good and safe state of repair, but a lodger (unlike most tenants) has fewer rights when it comes to challenging the rent you charge or any notice you give them to leave the accommodation;
indeed, the rules for lodgers fall principally within the government’s Rent a Room scheme – through which you might also claim a tax-free allowance on rental earnings of up to £7,500 a year – and which are also likely to apply when you act as a “host” to an Airbnb “guest” in your own home;
the specialist insurance you may need to maintain adequate cover for any home in which you are letting rooms to lodgers is lodgers’ home insurance;
if the accommodation is self-contained, on the other hand, you also assume a more formal role as a landlord;
in that capacity, you have a much wider and more onerous range of responsibilities and obligations – which are outlined in official government guidelines;
self-contained accommodation, of course, is just that – it has all the essential facilities any occupant may need, including its own bathroom, toilet and kitchen.
The distinction between shared and self-contained accommodation – whether you are accommodating lodgers or tenants – is an important one. It is also one that may introduce an element of confusion as far as some insurers are concerned.
That is why house conversion insurance for a granny annexe – or any similar use of an annexe, conversion or extension to your home – is a specialist product, on which you may benefit from expert advice.
Why may you need self-contained annexe insurance?
There are a number of reasons for the recent resurgence in popularity of a home conversion, extension or annexe to provide extra, supplementary accommodation – and here are just a few scenarios:
the traditional role of a self-contained granny annexe has recently taken on a solution to the current crisis in care home provision, argues a report in the Daily Mail newspaper on the 6th of September 2017;
such an annexe provides independent and self-contained accommodation for an ageing relative, who remain close to a caring family – but not too close;
with those final years in a care home costing as much as £92,000 in some parts of the country and nowhere cheaper than £50,000 – according to reports in the Telegraph newspaper on the 20th of March 2017 – a granny annexe may also represent a considerably more economic option;
insuring a granny annexe, though, becomes one of those important considerations in protecting your investment in the structure and its contents;
what is good for the ageing members of your family may also provide a solution for much younger members, who are beginning to find their own feet and yearning for a degree of independence;
rocketing house prices may have taken away the prospect of owning their own home any time soon, but separate, self-contained accommodation in the grounds of a parent’s home may provide an effective an economical solution – where annexe insurance is once again essential to providing the necessary safeguards for protecting the supplementary property;
a self-contained extension to your own home or a separate annexe may also provide a revenue-generating business when let to paying tenants;
in that case, of course, you take on the formal responsibilities and obligations of a landlord – however many days or for whatever length of time you are letting the property;
any specialist conversion insurance you arrange for that supplementary, self-contained accommodation let to tenants of course needs to reflect your role as the landlord;
in many parts of the country, a self-contained annexe or extension to your own home, may provide an attractive venue for visiting holiday makers;
once again, your potential for earning additional income from such holiday lets needs to be protected by a specialist form of holiday let insurance for the annexe;
a self-contained home conversion or annexe may also provide a way for you to cash in on the opportunities currently presented by Airbnb – especially if you home is in one of the UK’s frequently visited city destinations;
whilst many Airbnb guests may be accustomed to taking a spare room in the host’s home and sharing all the facilities on offer, the system also works for entirely self-contained holiday accommodation – and may command a higher rental income as a result;
in that event, you may need specialist Airbnb insurance for the annexe in the garden – and be fully aware that Airbnb’s own Host Guarantee provisions are no substitute for adequate, independent home insurance. (You can download our free Guide to Airbnb insurance here).
What is annexe insurance and what does it cover?
Specialist annexe insurance – in all its various forms, whether granny flat insurance, rented annexe insurance, holiday let insurance for an annexe, or Airbnb insurance for an annexe in the garden – is designed to protect the structure and fabric of the extension or annexe itself.
It also should provide indemnity for your liabilities as the property owner and offer an element of compensation for lost rental income (or the provision of alternative accommodation) should an insured event leave the annexe temporarily unusable.
To that end, the building sum insured typically represents the cost of reconstructing the extension or annexe in the event of a total loss, cover for any contents which you own (if you have contents insurance) and public liability insurance (in case any occupant, one of their visitors, a neighbour or a member of the public is injured or has their own property damaged through some contact with your property).
Whether you are letting to tenants, offering holiday lets or acting as an Airbnb host, your business may also be disrupted by any major insured event which leave the annexe or extension uninhabitable. In that case, self-contained annexe insurance may provide an element of compensation for your lost rental income.
Finally, you may be reassured by the fact that any kind of specialist annexe insurance continues to provide the cover you need, regardless of the status of the occupants as family members, lodgers or tenants (whether long- or short-term).
A home conversion, extension or self-contained annexe may provide a host of different uses – many of which have the added bonus or potentially earning extra income from the rent you receive.
But the accommodation provided by that home conversion, extension or annexe is also in a somewhat special and unique position that may put it beyond the scope of many regular forms of either home insurance, landlord insurance or holiday let insurance.
To ensure that you and the structures providing that supplementary accommodation remain fully and adequately protected, therefore, you might want to give serious thought to the need for specialist self-contained annexe insurance.
If a home conversion, an extension or an annexe in your garden is a project which appeals to you or offers some of the solutions you might be seeking, you might want to start by reading our specialist guide to building the perfect extension.