Going solar is like taking out insurance against rising energy costs. But what impact will going solar have on your homeowner’s insurance? As with many solar-related questions, the answer is that it varies from state to state, and even from utility to utility.
There are several steps regarding homeowner’s insurance you should take before you go solar:
- Know the relevant laws and regulations in your particular locality;
- Inform your homeowner’s insurance provider if you decide to go solar;
- Shop around for insurance prices and quotes, if necessary;
- Find out if the installation process itself is insured;
- Find out if particular phenomena are excluded from coverage, such as wind;
- Determine if there is a claim limit, as exists for some policies.
Most home insurance plans automatically cover solar panels if your policy is up to date. This might not be the case for a ground-mounted system. In that instance, a separate policy or add-on rider may be needed. It also may be necessary to increase the amount of homeowner’s insurance you have in order to cover your system, in which case the premium may go up.
“For Nationwide personal lines, solar homes may be covered [under a homeowner’s policy] as long as they meet other underwriting guidelines,” said Tracie Patten, Director, Public Relations at Nationwide. She cautioned that the company does “not offer a discount for this type of home”.
Janet Ruiz, West Coast Communications Director of the Insurance Information Institute (I.I.I.) said that a solar system owner should “ask your insurance company if they provide coverage for solar panels and if there are limitations in your state. Let them know the cost and if you are buying or leasing the system.” If you have a power purchase agreement, you technically do not own the panels so you may not need to insure them.
“You should verify with your insurance company if they consider solar panels on the roof to be structures attached to the dwelling,” Ruiz said. She said other things to watch out for are coverage limits (the maximum amount your policy will pay toward a covered loss), exclusions such as collapse or wind, or deductibles for events such as hurricanes (as is the case in Florida).
Utilities in some states require that customers obtain liability insurance for their systems. The utility’s rationale is that it must protect itself from liability should a customer-generated system cause injury or death (e.g. during an electrical blackout, when the rest of the grid is down). Some utilities require both liability insurance and legal indemnification.
Such requirements are, however, controversial. There are two main arguments against requiring solar liability insurance, one technical, the other legal. Both the Institute of Electrical and Electronic Engineers (IEEE) and Underwriters Laboratories (UL) set safety and engineering standards for the installation of solar systems. Some claim that, given that these standards are in force, there’s no need for insurance. For example, Montana requires that such technical standards be met as part of the interconnection process. Others claim that a mutual indemnity clause, in which each party agrees to hold the other party harmless in the case of specified losses, takes care of the legal issue.
In many cases, these utility requirements are perceived as an intentional barrier to solar, rather than a prudent safety or liability concern. In Florida, for example, systems over 10 kW in size require liability insurance of $1 million dollars. It’s not uncommon for a residential system to be larger than 10 kW, so this liability requirement may dissuade homeowners from sizing their system larger than 10 kW.
In Minnesota, any system of less than 40 kW requires a minimum of $300,000 liability insurance coverage. Wisconsin requires a minimum of $300,000 liability insurance for systems of less the 20kw, and $1,000,000 for systems between 20 kW and 200 kW. Connecticut requires a minimum of $300,000 liability insurance for systems up to 10 kW and from $300,000 to $5,000,000 for systems over 10 kW, depending on size. In all these cases, such requirements might serve as a disincentive to adopt solar.
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