You’ve heard about “green.” You know it has to do with eco-friendly buildings, vehicles and systems. Now you’re hearing more and more insurance companies touting “green” offerings. What does this mean to you?
Do You Plan to “Go Green”?
The number of homes in the U.S. currently enjoying LEED status is small. Many homeowners choose to spend a few dollars on minor upgrades but cannot afford to completely reconfigure. To serve this segment, quite a few insurance companies have introduced “green” optional additions to the existing homeowners policy that are designed to pay for the replacement of damaged property with more eco-friendly options. For example, if the home is damaged in a fire, most homeowner policies will replace damaged property with like kind and quality. With an eco-friendly option selected, the damaged property is replaced with materials that are more environmentally appropriate, such as those recognized by the U.S. Green Building Council.
Some auto insurance companies have followed suit, creating additions that can be purchased with an existing personal auto policy. Such an addition would mean that, if the vehicle were damaged to the point of replacement, it would be replaced with an eco-friendly equivalent, such as a hybrid model.
Get credit for your work
You can receive federal tax credits for qualified efficiency improvements and residential energy property. Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency.
- Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home.
- Exterior windows (including skylights).
- Exterior doors.
- Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home.
Residential energy property is any of the following:
- Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel.
- Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers.
- Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces.
- Qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property.
Watch for Ordinance and Law
It’s true that “green upgrade” insurance for homes and similar products for commercial buildings may pay to replace your damaged building and contents with eco-friendly alternatives, but most green upgrade products are optional. They are typically more expensive; thus, many will choose to forgo the coverage.
If you choose to skip them, keep in mind that many communities are adopting strict environmental building codes requiring homes or buildings to be repaired or replaced with more expensive eco-friendly materials. For this reason, pay close attention to your policy’s ordinance and law coverage. One of the important functions of this insurance is to help cover the increased cost of construction incurred due to a governmental rule. For example, your homeowners insurance policy will pay to replace HVAC equipment damaged in a house fire. If an applicable building ordinance or law requires the HVAC to be repaired with an eco-friendly, more costly alternative, you may have to rely on ordinance and law coverage to pay the difference. If that coverage is insufficient or not present on the policy, you will have to absorb the costs of the mandatory upgrade.
Building ordinances and laws differ depending on where you live; some communities are much stricter than others. It’s important to make sure that ordinance and law coverage is included in your policy and that it will respond to ecological requirements.
Some Questions to Consider
Is going green with your insurance a smart move? There are several considerations. For example, how substantial are the discounts available for eco-friendly property you may already own? Is the increased premium for upgraded insurance products worth the cost, or would it be a better value to stick with traditional insurance and pay the cost of upgrades yourself? Does your policy include ordinance and law coverage? What ordinances or laws are in effect in your community that could result in a higher cost of repair and replacement?
Where should you start?