As the green revolution continues to gain popularity, homeowners are discovering practical ways to reduce their carbon footprint. One of the most meaningful ways is by making eco-friendly modifications to your home and making sure your homeowners insurance takes them into account.
Whether you’re on the market for a new energy-efficient home or interested in upgrading your current space, you must make sure your policy is ready to accommodate those changes. While many insurers are extending their coverage to include green renovations, not all offer this additional coverage.
We’re here to guide you through how typical eco-friendly home modifications impact your home and your homeowners insurance. We’ll break down four home improvements you can make to your home, the benefits, installation considerations and insurance implications.
One of the most common eco-friendly home modifications, solar energy is the cleanest and most abundant resource available to us. A big investment, solar energy gives homeowners a way to save money and generate their own electricity.
Lower energy costs
In the U.S., the demand for solar energy is at an all-time high. As the prices of installation have dropped, solar energy has become an economical choice for many homeowners. The lifespan of solar panels is typically around 25-35 years, so they are a long-term investment that will continue to pay off.
Increased home value
In addition to saving money, installing solar equipment to your home can increase its value, sometimes by tens of thousands of dollars. While a solar upgrade can be an expensive investment, the increased home value can help you earn back what you spend.
Reduced environmental impact
Besides the potential tax breaks, solar energy has a positive impact on the earth. Solar energy doesn’t produce air pollution or carbon dioxide, which helps reduce emissions and the negative impact on the environment. Solar panels help homeowners take control of their energy consumption and also contribute to the reduction of U.S. dependence on other energy sources.
Solar energy installation considerations
Roof stability
Not every roof can support a solar energy system. Hardware options will differ by weight and sizes, so make sure you understand what a roof needs to be able to support them. Even for roofs that are designed to support solar panels, installation can have unintended consequences. If your roof is damaged during the installation process, your insurance policy may not cover it. Make sure you contact your provider to discuss your coverage and avoid being forced to pay out of pocket to cover damages.
Cost
While the hardware cost continues to drop, the soft costs associated with solar installation aren’t dropping nearly as fast. At the end of 2018, the average price of a residential rooftop system was around $ 18,000, before tax credits or incentives. Approximately 64% of the total cost of residential systems. These costs include, but are not limited to:
- Permits
- Labor
- Sales tax
- Indirect corporate costs
- Supply chain costs
- Transaction costs
Even though solar energy is much more affordable than it once was, it is still out of reach for some. Thankfully, there are financing options for homeowners.
| Solar power financing options | |
|---|---|
| Third-party ownership | 40% of homeowners with solar energy systems use third-party ownership. Under this type of agreement, homeowners spread out their payments over time and share the responsibility of maintenance with the third party. |
| Solar lease | A solar lease requires the homeowner to pay fixed payments to the solar leasing company. The homeowner will pay any electricity usage that extends beyond what the system generates. |
| Loan financing | Solar loans are designed to help homeowners stretch the system’s cost of the system over the length of the term while directly owning the panels and all the benefits that result from them. |
Tax incentives
As a way to reward homeowners for choosing solar energy, the U.S. government offers tax breaks and incentives.
- Tax credits — There are both federal and state tax credits given to homeowners, allowing them to deduct a percentage of their solar costs from their taxes.
- Solar renewable energy certificates (SRECs) — If you live in a state which requires that a certain amount of their allotted yearly energy has to come from solar power, you will collect SRECs. You can sell SRECs to supplement your income.
- Performance-based incentives (PBIs) — PBIs are paid to homeowners (per kilowatt-hour) for the energy that’s produced by their systems. The rate is set at the time of installation.
Solar energy insurance implications
Most homeowners insurance policies cover rooftop panels, though you may consider increasing your coverage to include the cost of the entire system. Remember, all insurance policies are different. Examine your policy and contact your provider to see what your needs are since other options like ground-based and carport systems are not always covered.
Shamor Paul, co-founder of Sunly said, “A solar power system, if designed and installed by a professional, and carrying all necessary approvals and inspections, should not be an issue to get insured. As it is an added asset to the home, the premium may increase to cover the replacement cost.”
If you plan to sell the extra energy you generate, consider additional liability through Green Energy Insurance. This coverage would protect you in case of a net-metering accident that damages property or harms the employees of the municipality.
Geothermal heating and cooling
One of the lesser-known energy options, geothermal systems use the earth’s heat to warm and cool your home. There are three main types of geothermal technologies: ground source heat pumps, direct use geothermal and deep and enhanced geothermal systems.
Geothermal heating and cooling benefits
Lower energy costs
Geothermal systems yield substantial energy savings for homeowners. Up to 65% more effective than regular HVAC systems, installing a geothermal system in your home can reduce your energy costs by approximately 70% per year.
Another advantage of this method is its single system design. You can avoid worrying about multiple components that can break at any point and reduce maintenance costs. These systems also have an extremely long lifespan, so there won’t be a need to replace parts regularly.
Increase home value
Geothermal energy is a long-term investment that results in considerable savings. Even though installing a geothermal system is expensive, you are adding a significant amount of value to your home. Unlike solar energy, which requires visible hardware, most of the geothermal components are buried underground. This not only protects the investment but also means that the curb appeal is high.
Reduced environmental impact
An effective way to reduce your carbon footprint, geothermal systems use 25% to 50% less electricity than conventional options and don’t contribute to the burning of fossil fuels or greenhouse gas emissions. As an added bonus for your family’s safety, this type of energy eliminates the chance of a carbon monoxide leak in your home. Choosing to pursue geothermal energy is one of the most environmentally-clean home improvements you can make.
Geothermals installation considerations
Property suitability
While geothermal technology can thrive in any environment, it doesn’t mean that any home is suited for it. When evaluating your home for a geothermal system, your provider will consider three things:
- Soil properties
- Groundwater available
- Available land
Cost
The installation cost of a geothermal heat pump generally ranges somewhere between $ 10,000 to $ 25,000. The upfront cost is noticeably higher than traditional options, but the savings over the lifespan of your system can be worth it. Low operating and maintenance costs also supplement the initial costs, leaving you to break even on the entire system in under ten years.
Like solar energy, there are federal and state tax incentives and select financing options available to help mitigate the cost. Figure out what incentives you’re eligible for here.
Geothermal systems insurance implications
With such an expensive system, making sure your insurance covers your investment is crucial. Start by contacting your provider to see what is included. If you have an extensive system, you may need additional coverage. Most components of a geothermal system are buried underground, which means they are safe from external dangers like vandalism, hail or wind damage. But if you live in an area that is prone to earthquakes, be wary. Since homeowner insurance policies do not cover earthquakes, you should take out an additional policy to cover your investment.
Rain harvesting
Rain harvesting is one of the easiest eco-friendly home modifications. Collecting water for future use, it also reduces storm water pollution. You can use the rainwater you harvest for outdoor irrigation or utilize it in your home for laundry, cleaning or purified human use.
Benefits of rain harvesting
Lower water costs
Collecting rainwater allows you to be less reliant on water companies. And if you have enough to meet your daily needs, it will drastically reduce your water bill. Another great benefit about harvesting rainwater is its storage life. Since rainwater is not always consistent — and in some areas scarce. having a reservoir of rain can help you get through dry seasons.
Rain harvesting systems generally have low maintenance costs, especially if you are collecting water for outdoor use with no purification requirements. After installation costs, you shouldn’t expect to dedicate funds for regular maintenance.
Increased home value
Having a well-maintained rain harvesting system can have a positive effect on your property’s value. If you plan to sell your home, most potential buyers might find the eco-friendly system attractive and vital as the demand for clean water continues to grow.
Reduce environmental impact
Harvesting rainwater impacts the environment in multiple ways. Collecting rainwater allows you to lessen your reliance on companies and reduce the demand for groundwater, which keeps increasing every year.
Collecting rainwater also reduces the chances of soil contamination. Runoff water can pick up contaminants from pesticides and other pollutants and spread them to the surrounding water sources. Eliminating the chance for excess water to run off by collecting and reusing it is a way to mitigate the negative impacts of pollution. In addition to increasing your home value and reducing an environmental impact, rainwater harvesting systems give your home an emergency water supply.
Rain harvesting installation considerations
Property suitability
Rainwater harvesting systems can be easily integrated into most homes, though some things can rule out suitability entirely. Your roof and gutters are at the center of property compatibility. Depending on the material they are made of, they could potentially introduce contaminants into your water supply. Older pipes or galvanized roofs may cause lead, copper or zinc contamination. So before installing any system, make sure you identify what materials your roof and gutters are made of.
Not every climate is a match either. Infrequent rainfall negates the purpose of rain harvesting systems altogether. If you live in a particularly arid climate, for example, you would not see a quick return on investment.
Cost
You decide how intricate you want your water harvesting system to be. It can be as simple as one tank or more complex with pumps and purification technology. The price of these systems can range from hundreds to thousands of dollars, depending on which system you choose. The initial cost of setting up a water harvesting system is high, and the return isn’t as quick as what you see with geothermal systems.
Time
A rainwater harvesting system requires a big time commitment from homeowners. You’ll have to regularly check your tanks and make sure they are clean. So while it won’t cost as much some of the more involved home modifications, it requires more of your time.
State and local restrictions
There are no federal laws concerning rainwater harvesting, though some states do have restrictions on how much rainwater you can collect. States also specify where and when you can collect rainwater and limit how it can be used. For example, there are generally stricter guidelines if the water is intended for drinking.
In climates where rainfall is not frequent, states may restrict collection to ensure that the water that does fall flows to its rightful water drainage system and is not limited to a number of people. Read more about the laws and legislation of states here.
Rain harvesting insurance implications
Contact your broker before installing a system to make sure your home insurance policy will cover it. Much like solar panels, rainwater harvesting requires above ground, outside fixtures. This means that the equipment is susceptible to damage. When going over your current policy, make sure you consider potential damage to the system, as well as to your home. Leaks or floods as a result of your rainwater harvesting system may not be covered under every policy, so adding coverage is always a good idea.
ENERGY STAR products
ENERGY STAR appliances and products use less energy than the traditional options on the market. To be considered an ENERGY STAR product, it must meet the energy requirements set by the U.S. Environmental Protection Agency (EPA). As a homeowner, choosing appliances and products with an ENERGY STAR will help you save money, energy and contribute less to harmful emissions.
ENERGY STAR Benefits
Lower energy costs
The average homeowner can save hundreds of dollars on their energy bills by choosing products with the ENERGY STAR. Designed to be energy efficient, the appliances you replace will impact how much money you save on your energy bills. For instance, a traditional clothes dryer can use the same amount of energy as an ENERGY STAR model dishwasher, refrigerator, and washing machine combined.
Beyond just certified appliances, ENERGY STAR also offers installation of doors and windows designed to control air leakage and sunlight transmittance.
Increase home value
There is no denying that replacing appliances with ENERGY STAR models is a significant investment. But once the installation process is over, you’ll be rewarded with incremental home value ranging from hundreds to thousands of dollars. While the increase may not be as substantial as installing solar panels, energy efficiency is a selling point for many buyers on the market.
Reduced environmental impact
ENERGY STAR’s mission is to reduce the impact we have on the environment. Since 1992, the label has helped reduce greenhouse gases by more than 3.5 billion metric tons, which is proportional to the yearly emissions 750 million cars would produce. While saving money on electricity bills directly benefits homeowners, the environmental impact ENERGY STAR products reduce cannot be ignored.
ENERGY STAR Installation considerations
Cost
The benefits of switching to ENERGY STAR certified products cannot be overstated. But updating your home with these types of appliances will require a considerable amount of money, especially if you plan to make replacements all at once.
Depending on the appliances you want to replace, your energy savings may not be as significant at the beginning. For example, a dishwasher will most likely yield fewer savings than a refrigerator because it uses less energy by default. If updating all of your appliances is unrealistic for your budget, create a long-term plan to gradually switch to all ENERGY STAR products.
To help offset some of these costs, the government offers federal income tax credits for making energy-efficient improvements to your home. However, to claim the tax credits, the improvements must be made to your home before 2021.
ENERGY STAR Insurance implications
Adding ENERGY STAR appliances and updates to your home generally doesn’t impact your insurance. Most homeowners insurance policies have coverage for energy-efficient appliances. Contact your insurance provider to better understand what type of coverage you need and what incentives they provide.
Final thoughts
Eco-friendly home modifications are considerable investments but benefit homeowners with savings, increased home value and tax credits. More than that, these home modifications are changes homeowners can make to help the environment. Personal responsibility for your carbon footprint is part of living in the global community. No matter how many changes you are able to make, every bit makes an impact.
