Insuring two properties at one address

[Jairus Burpo]

My wife and I are considering the purchase of a 3 bed 2 bath with a detached 1 bed 1 bath on the same property. In my analysis, I estimated the annual insurance premium as if they were combined, then I learned that the 1 bed 1 bath must be insured separately. Both buildings are included under the same address.

Can I legally insure the 1 bed 1 bath as a shop even if I am renting it out, or does it have to be insured as a separate dwelling? I'm trying to get an accurate annual insurance premium estmate for my analysis.

[Dan H.]

My experience (not restricted to ADUs) is if the units are detached, it is a policy per detached unit and if they are attached it is one policy covering all attached units.  This has been the case with 3 separate insurers (3 out of 3), so I believe this is the standard process.  Note I do not claim it makes sense.  Detached units have significantly higher insurance costs than attached units.   

Furthermore, virtually every time the loan is purchased on a property with Multiple insurance policies, the insurance info does not accurately transfer to the buyer of the loan.   It virtually always requires us to manually participate in getting the correct insurance info to the new lender even though the old lender had it correct.   This seems to indicate that the lenders’ process is not typically set up for this situation.

I have long held the view that the property owner should receive some small compensation when their loan is sold.   At a very minimum the owners have to update their loan payment information (we set up new auto payment and update our records on the loan owner).  In many cases it requires interacting with the new owner of the loan because something failed to transfer correctly).   Most Banks share for a wire transfer which I 5minutes of effort.  

Good luck