You’ve heard you can lower your homeowners insurance quotes with an environmentally friendly home. But what exactly does that mean? How is the insurance industry falling in line with the “green” movement and which modifications are actually worth the time and effort? Essentially, there are two kinds of consumers interested in “greening” their insurance policies, those who simply want to save money and those who are looking for help to become more eco-friendly in the future.
Gradually the insurance industry is modifying its risk profiles to benefit environmentally conscious consumers, who are seen as less likely to file a claim both because their homes are more efficient and because they, themselves, are more cautious. The thinking is that green homes are more durable and less prone to breakdowns. On the flip side of this equation, however, are green enhancements like the addition of solar panels that, while lowering your electrical bill may actually raise your premiums. This is especially true in storm-prone areas where the panels are likely to be repeatedly damaged. Essentially this means that not all green modification are equal in the eyes of the insurance man.
The safest discounts to seek are those that are awarded to homes that qualify for a Leadership in Energy and Environmental Design certification or those given out for Energy Star-rated appliances. Water heaters, air conditioners, and heaters that are designed to run more efficiently also run less, making for fewer mechanical issues and claims. The industry-wide standard for such discounts is now about 10% and generally requires nothing more than apprising your provider of the installation of the unit or the awarding of the certification. (Homeowners should also talk to their insurer after remodeling projects that have included the use of toxin-free materials or the placement of extra insulation and double pane windows.)
Two major types of insurance products are emerging in this trend toward green recognition. First are policies that cover buildings that meet established standards of efficiency and sustainability. The other is an addition or endorsement to an existing policy that will allow the homeowner, in the event of a claim, to replace damaged materials or appliances with more environmentally sensitive choices in the future. This avenue actually adds about 2% to the annual premium cost of a homeowners policy, which would be roughly $25 on a home insured for $350,000. Such an endorsement will, however, greatly reduce the cost of green home improvements in the future.
With more energy efficient and green home choices available, homeowners should be extra vigilant about reviewing their policies at least once a year. You wouldn’t let your home just stand there without maintenance for months at a time. Don’t let that happen to the policy that is protecting your home. Otherwise, you may be insuring items you no longer own or missing out on discounts for green choices and improvements that the insurance industry is now willing to recognize and reward.