What is an ADU & how do I insure one in California?

Accessory dwelling units, often called ADUs or “granny flats” for short, are an increasingly popular way for California homeowners to add living space and value to their property.

We look at what an ADU is and how you can insure one as part of your homeowners insurance.

What is an accessory dwelling unit, or ADU?

An ADU is an additional living space that is on the same property as your primary dwelling. It can be attached to or detached from the structure of your home. Most ADUs are either an attached expansion with independent access (such as a guest room with private exterior access) or a detached unit in the backyard. A basement or other interior space that is converted into a separate unit can also be considered an ADU. 

ADUs can be built in many ways, such as adding a second tory to an existing garage or bringing in a pre-fabricated building picked out of a catalog. The specifics may depend on local and state ADU regulations, which differ across the country but often require that an ADU be no bigger than a certain size.

Why add an ADU?

Many homeowners lease their ADUs out as a source of rental income, one that doesn't require buying a separate rental property. Some use ADUs to house their aging parents close by (hence the "granny flat" term) while still giving them independence. Others use them as a home office separate from the distractions of home, or just as a flexible additional space to serve multiple needs.

Regardless of what they're using it for, most homeowners also add an ADU as an investment that raises their property value.

How do I insure my ADU in California?

Broadly speaking, it depends primarily on whether your ADU is part of the structure of your primary dwelling, and secondarily on whether you're renting it out. The exact way your insurance situation breaks down will depend on where in California you live and who your insurer is. It's also important to note that an inspection of the property may be required to ensure your ADU qualifies for coverage and will be properly covered.

  • If your ADU is attached to your home: It can be insured on your current homeowners policy, even if you or your family don't live in the ADU itself, and even if you rent it out. This can be done by contacting your insurance agent and amending your existing insurance to cover the new 2nd unit.
  • If your ADU is not attached to your home, but a blood relative resides in it: It can still be insured under your dwelling coverage, even if your relative pays you rent. Like an attached ADU, you would contact your insurance agent and amend your existing homeowners insurance to ensure adequate coverage.
  • If your ADU is not attached to your home, and you rent it to a non-relative: In this case, your ADU would typically be insured with a separate rental dwelling policy, at its own address. This would insure you for potential losses related to renting out a property, like liability coverage or damage to your furnishings.

If your ADU is inhabited by a family member or relative, make sure their personal belongings are covered—depending on the situation, it's possible they'll need renters insurance. Check with your agent to make sure your coverages meet your needs.

Speak to a AAA insurance agent about insuring your ADU

Whether you've just built an ADU on your property, are moving to a new home that has an ADU, or have another ADU-related insurance need, find out how much you could save with AAA.

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