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Solar power is becoming increasingly popular among homeowners seeking to save money on energy. In 2021, residential solar installations grew by 30% over the prior year—the industry's fifth year of record growth.
While solar power can cut your costs in the long run, purchasing the panels costs an average of $20,000, according to the Center for Sustainable Energy. Solar panels are generally included in standard homeowners insurance policies, but coverage can vary depending on your solar setup and your state's insurance regulations. You should check with your insurance company before installing solar to make sure your pricey investment is protected.
Are Solar Panels Included in Homeowners Insurance Policies?
Standard homeowners insurance policies generally include solar panels mounted on the roof and permanently attached to your home in your dwelling coverage. If the panels are separate from your home's primary structure—mounted on the ground or on a detached carport, for instance—they are usually included in coverage for "other structures." Depending on your insurer, you might also be able to get a rider or endorsement for solar panels that aren't attached to your primary dwelling.
If you lease your solar panels or use a power purchase agreement instead of buying the panels, ask the solar company how insuring them works. Many companies will insure the panels themselves. However, some companies may want you to add them to your homeowners insurance, or to buy solar panel insurance that they sell.
Liability issues related to solar energy are another factor that may affect your insurance needs. Liability insurance is part of standard home insurance policies and protects you if a visitor is injured on your property.
Laws in some states require homeowners with solar panels to have liability insurance in case the panels malfunction and damage the utility system or injure a utility worker. These insurance requirements are usually tied to the amount of power a system generates or to the practice of "net metering," in which homeowners sell unused power they generate back to the utility company.
For example, Wisconsin requires either $300,000 or $1 million in liability insurance for residential solar depending on its generating capacity. Homeowners insurance typically includes $100,000 worth of liability insurance, not enough to meet these requirements. You can increase your liability coverage, usually for about $10 annually for each $100,000 of insurance.
If your state requires more insurance and you've maxed out your homeowners liability coverage, umbrella insurance can come to the rescue. Umbrella insurance, available in $1 million increments, pays out if you have liability above your homeowners liability coverage.
There may be other solar panel insurance requirements depending on your state. In Illinois, for instance, homeowners who sell their Solar Renewable Energy Credits must include their credit aggregator as an additional insured on their homeowners insurance policy. Some insurers in Florida will not insure any home that uses net metering.
Because insurance requirements for solar panels can vary so widely, it's best to consult an insurance agent who understands local regulations before purchasing or leasing solar panels to make sure you can get the proper coverage.
Finally, be aware that if your home is damaged during solar panel installation, your homeowners insurance won't cover repairs. For that, you'll need to rely on the installer's insurance. Before work begins, ask for proof of general liability and professional liability insurance from any contractor, designer or installer who will be working on your home.
What Type of Damage Is Covered?
If your homeowners insurance covers your solar panels, you should be protected against any risk (or "peril") listed in your policy. Typically, that includes:
- Fire and smoke damage
- Hail, lightning or wind
- Water, including from a freeze or related to mold
- Vandalism or theft
Don't expect your homeowners insurance to cover damage to your solar panels from:
- Floods (you can purchase flood insurance for this)
- Wear and tear
Coverage may be different for other structures than for your primary dwelling. Read your policy carefully to clarify any exceptions or exclusions. For example, some homeowners insurance policies specifically exclude solar panel coverage for wind or hail damage, even though the panels are exposed and very vulnerable to this type of weather. In Florida, where claims for hurricane damage are common, some insurers will not cover solar panels at all.
When to Adjust Your Homeowners Insurance Coverage Limit
Whether adding solar panels increases your home's value is up for debate, and may vary depending on where you live. But the panels do mean higher costs for rebuilding or repairs if your home is damaged or destroyed and you have to file a claim. You may want to increase your coverage limit to include the added value of the solar panels. Raising your coverage limits may also be a condition of solar leases or power purchase agreements.
Again, consult with your insurance agent to determine whether or not you'll need to increase your coverage limit, and by how much, to make sure you're covered.
The Bottom Line
When making the decision to add solar panels to your home, assessing solar power's impact on your insurance coverage should be part of your research. Whether the panels are covered by your existing homeowners insurance or require additional coverage, the cost should be affordable.
If you're concerned about the impact on your budget, maintaining good credit can help lower your insurance premiums. Insurers in most states can check your credit-based insurance score when pricing your home insurance. Although this score differs from the scores lenders use, they are based on similar factors. Keeping debt minimal, paying your bills on time and avoiding applications for new credit can all help to keep your credit in good shape.