How much does it cost to insure solar panels?

How Much Does It Cost To Insure Solar Panels?

How much does it cost to insure solar panels?

With over 3 million homes in the United States having solar installed as of 2021,1 insurance companies have a simple calculation to determine what they will charge you to add the solar panels onto your homeowner’s insurance (as described below).

If you live in California your carrier may not even use a separate endorsement, because the state is mandating solar panels for new construction.

How Much Does It Cost To Insure Solar Panels?

Note that the cost to insure solar panels is different for commercial solar systems and residential rooftop solar systems (i.e. solar on your home). 

Commercial solar farm insurance cost is determined on a standalone basis whereas residential solar panels will be added to a homeowner’s policy. 

The cost to insure solar panels on your home is a simple calculation based on the value of the solar panels (or what it would cost to replace them). 

This amount is usually included in the total value of your home and is called “total insurable value“.

The total insurable value refers to the sum of the full replacement cost of your covered property, including the contents of your home, in the event of a “total loss”.

In other words, what would it cost the insurance carrier to completely rebuild your home, and provide you and your family with comparable living arrangements, if you lost everything, such as from a fire, flood, natural disaster or another covered peril.

How Much Does It Cost To Insure Solar Panels?

The rate insurance carriers will charge is determined by the amount of perceived risk for your home.

Homeowners’ property insurance premiums may be based on the following four factors… These factors be easily remembered in the acronym “COPE”:

  1. Construction: How large and what type of construction is your home? Is it brick? Is it wood frame with wood siding? Stucco? Properties cost less to insure if they are built from non-combustible or fire resistant materials… Conversely, wood framed construction is more prone to fire, water and mold damage.
  2. Occupancy: Who lives in your home? Are you empty nesters? Or are there kids in your home too…? Does anyone smoke? Is the home a primary residence or is it a vacation home and therefore vacant most of the year? The occupancy, ages and behaviors of the residents in your home have an impact on the insurance premium you pay.
  3. Protection: What sort of protection does your home have? Do you have a smoke alarm? If so, is it hard-wired or battery powered…? What about a central station fire alarm that will alert the fire department in the event of a fire? Are there water or moisture detectors in the basement? Homes that have more protection against common causes of loss such as fire and water damage will pay less in insurance premiums than homes without these protections.
  4. Exposure: Where is your home located and what is nearby…? Is your home located on the coast near the water? Is it in an area known for high winds or hurricane exposure? How far is your home from the nearest fire hydrant? What about exposure to trees or woods in an areas where wildfires are common? Are floods common where you live? Do you live in a high crime area? Every home has unique value (and unique risks) based on its location, neighborhood, weather and relative exposure to these elements.

All of these factors play a part in the insurance premium for your home (and even other insurance).

However, every home will be priced differently…

  1. Homeowner A: A 2,000 square foot wood framed home with no smoke detectors, no fire alarm or burglar alarm that is located on the water in Miami, Florida (occupied only half the year) by a young couple with a large dog – and the husband smokes.
  2. Homeowner B: A 2,000 square foot primary residence constructed with insulated concrete forms, with a hard-wired fire alarm and burglar alarm and occupied full time by a middle aged, non-smoking, couple with no pets in Saratoga Springs, NY.

Homeowner B is likely to pay less for insurance because the “Construction” is more resilient, the “Occupancy” is occupied by non-smokers year round, as opposed to vacant, the “Protection” shows they have invested in technology to protect the home and the “Exposure” indicates they’re not in a potentially hazardous, high wind zone. 

Cost To Insure Solar Panels Calculation Example

Solar panel insurance companies use a simple calculation to determine the insurance premium for your home, including solar panels.

The cost to insure solar panels on your home is determined by a “rate” multiplied by an “exposure unit” in dollars.

The “rate” is determined by the COPE factors above, as well as other expenses the insurance company incurs in underwriting your insurance policy.

The “exposure unit” is expressed as a round number value, such as $1,000, representing a unit of replacement cost.

The calculation is:

Rate * Exposure Units = Premium

The following is a hypothetical example of a calculation of the insurance premium for a $25,000 solar panel system installed on a home.

What's the cost to insure solar panels?

The average cost of solar panels varies by state and system size (kW) for a residential home in the U.S.

You should check the price of a solar system in your area. Energy Sage has a helpful list of average solar panel price ranges by state.

For instance, in New York the price of solar panels is $12,264 – $16,044 for a 6 kW system for a residential home. (Note: these prices are AFTER taking advantage of the 30% federal tax credit).

If your home came with solar panels installed already, then the cost to insure solar panels is already included in your homeowners insurance premium…

However, if you are planning on adding solar panels to your home, then the cost to replace your home may increase by the value of the solar panels.

Either way, you should give your broker, or agent, a call to double check.

Depending on your homeowners insurance carrier, they may not charge an additional premium at all.

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Footnotes

  1. According to the Solar Energy Industries Association (SEIA)
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