5 types of solar insurance for home and business

5 Types of Solar Insurance You Should Know About

Solar insurance protects solar contractors, developers and their projects.

If you run a solar business, this article describes five types of solar insurance you should know about that can help you save money, protect your business, reduce risk and even close more deals:

  1. Solar Insurance for Contractors
  2. Solar Panel Insurance
  3. Solar Production Insurance
  4. Solar Offtaker Insurance
  5. Solar Installation Performance Warranty Insurance

The right insurance can save real money… Recent Rob Freeman client insurance success stories include:

  • $40,000 saved annually on general liability and umbrella (residential solar contractor)
  • $100,000 saved annually on general liability, umbrella and workers’ compensation (solar developer in New York)

If you need insurance for your solar business schedule an appointment with me below. 

solar contractor insurance

1. Solar Insurance For Contractors

Solar contractors have real insurance exposures that include working at heights, sub-contractor injuries, risk of electric shock and damaging a client’s roof during an installation.

Sadly many solar contractor insurance policies are cheap, cookie cutter, “off the shelf” policies. 

The policies have holes in them and they don’t hold water – let alone an expensive insurance claim.

Indeed, to me it looks like someone shot the insurance policy with a machine gun… They have so many holes!

solar contractor insurance exclusions
This solar insurance policy has so many holes...!

Don’t wait until after you’ve had an insurance claim to realize that your solar contractors insurance policy excludes all the work you do.

At a minimum, your business may need the following solar insurance coverages:

  • Commercial general liability (aka “CGL”)
  • Umbrella or excess
  • Property insurance
  • Workers’ compensation
  • Business auto (or hired/non-owned auto)
  • Professional liability

Depending on your solar business, some exclusions in your policy may be more dangerous than others.

Look in your policy for exclusions such as New York Labor Law and action over, professional services, work on schools or recreational facilities, height limitations, injury to subcontractors or day laborers, falling from heights, a hammer clause, bodily injury, residential exclusions, roofing operations, etc.

If you’re confused by your insurance, schedule an appointment with me to review your policy. 

Chances are good I can get you access to an affordable solar contractor insurance program that covers all of the exposures described above, in a single policy, with savings as illustrated below.

Compared to a generic insurance carrier, you could save thousands, or tens of thousands of dollars per year.

2. Solar Panel Insurance

According to the SEIA1 as of 2020, over 2 million homes and businesses have solar panels – and all of them need insurance.

Solar panel insurance is property insurance. Solar panel insurance protects the solar system you own or the solar property and equipment you have in your control.

You can add solar panels to your property insurance or homeowner’s policy. Or, if you have a home ground mount system, it might be added to “other structures” on your policy.

Commercial solar insurance should be “all risk” and include the business income or protect against business interruption. 

Insurance companies have use a simple calculation to determine the cost of solar panel insurance.

Installation Floater or Inland Marine Insurance

An installation floater is also property insurance. An installation floater is an insurance policy that covers business property that is to be installed, fabricated or erected during an installation phase, or construction process, of a building being renovated, upgraded or remodeled.

The word “floater” is used because the policy provides coverage without regard to the location of the property covered. 

A “floater” policy is a type of inland marine coverage.

An installation floater can cover solar equipment (panels, inverters, racking systems, storage, etc.) that are to be installed, fabricated or erected for the client and that will become a permanent part of your installation or construction process.

The installation floater may also cover the cost of labor during the process, however, this may be a supplemental coverage known as “builder’s risk” that carries an additional cost.

Floaters are typically written on the IM 7100 form1, a “special perils” (also known as an “All Risks”) form. Special perils means that the installation floater covers any risk except those that are specifically excluded in the form. 

Examples of excluded perils are flood, earthquake, fraud, missing property, etc.

Installation Floater vs. Builder’s Risk

Installation floaters are often placed with, but are not the same thing as, a builders risk insurance policy.

A builders risk policy is broader than an installation floater.

Whereas installation floaters will NOT cover buildings, a builder’s risk policy covers buildings under construction as well as business property and also lost income or time invested in a project that is lost due to a covered cause of loss.

Like an installation floater, a builder’s risk policy is written on a “special perils” (also known as an “All Risks”) form.

Special perils means that the installation floater covers any risk except those that are specifically excluded in the form.

3. Solar Production Insurance

Commercial and industrial solar projects may require a solar production guarantee. Solar production insurance guarantees that your system will produce the kW or MW output that you’ve forecasted.

Sadly, many commercial and industrial solar project underperform against their projections for power output. 

Solar production insurance (aka “SPI”) guarantees the production of solar energy for medium, large and grid scale solar projects. 

SPI solves the risk of underperformance for buyers and lenders when calculating the kWh output of solar projects, including power purchase agreements (aka “PPA”), large solar leases, community solar projects, grid-scale solar systems and more.

Solar production insurance is underwritten by engineers experienced in solar energy risk and backed by A+ rated insurance carriers 1 by reviewing:

  • Solar production models (such as PVSyst)
  • PPA/project documentation
  • Technical documentation
  • M&V plans
  • Facility description
  • Historical utility bills 

For a one time premium policies are bound for 1-2 years and renewed annually. Once a project policy is bound, if a solar energy shortfall occurs below a predetermined percentage – typically 90-95% – the policy is triggered, paying the customer the difference up to a maximum dollar limit.

This type of solar insurance policy includes “All Risk” property insurance and builder’s risk insurance to protect against physical damage.

Contractual liability insurance claim example

4. Solar Offtaker Insurance

Offtaker creditworthiness is very important to solar developments, such as PPAs… 

Some private companies, schools, municipalities, non-profits, etc. want solar but may have no credit rating at all.

This is where solar offtaker insurance comes in.

Solar offtaker insurance transforms non-investment grade (or unrated) offtakers into investment grade offtakers for a one time premium and guarantees payments to lenders and/or solar tax equity for years into the future.

Solar offtaker insurance is ideal for solar projects >1MW and solar developers who want to close more deals. Pricing is quick to estimate for small and medium sized C&I projects. 

To reduce risk of default, solar developers and EPCs buy offtaker insurance as a form of credit enhancement to unlock project financing, reduce the cost of capital and increase loan to value (LTV) levels. 

5. Solar Installation Performance Warranty Insurance

Self-insurance – or the assumption of liability by a solar contractor if solar panels they install fail to perform – is common among solar contractors and developers… 

This is because of the perception that solar projects rarely fail.

But this is not always true.

The story of TenK Solar is a good example of solar panel systems failing to perform – followed by the manufacturer going out of business.

TenK Solar was a much heralded solar panel system provider used by residential and commercial solar contractors. TenK claimed its solar panel system with a built-in reflector had superior production capabilities and reduced inverter losses… These claims resulted in solar contractors generating aggressive pro-formas for customers showing rapid payback on the cost of their solar panels.

Unfortunately, TenK’s promises didn’t always materialize due to multiple factors including the failure of bad components and system under-performance. As a result, the company closed its doors.

Solar contractors had to scramble to replace solar panels that failed and address customer systems that didn’t perform as promised.

Solar installation performance warranty insurance (SIPW) policy protects businesses by backstopping warranties on solar products.

The SIPW insurance policy indemnifies the solar contractor and pays for the cost of repair or replacement of systems that failed to perform according to the manufacturer’s warranty. 

If you have questions about your solar insurance, schedule an appointment with me. 

I look forward to talking with you about your solar business. 

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Footnotes

  1. By A.M Best.
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