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What is green insurance for your home?

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    You may be familiar with the concept of sustainability as it relates to fashion, farming or energy. Industries are evolving toward more “green,” environmentally friendly practices, and the world of real estate is knocking on the very same door with products like green insurance.

    How green home insurance works

    Green (or eco) insurance provides an environmental incentive for homeowners insurance policy holders. It’s typically offered to homeowners as an add-on or discount to their homeowner’s insurance policy. Do note that because green insurance is an emerging practice, it may not be offered by all insurance providers and the product offered might look different across the insurance industry.

    Some green insurance clauses may provide coverage for certain home renovations. For example:

    • Eco-friendly material replacement endorsement is an example of a green insurance clause. If you have this clause in your homeowners insurance policy, the insurer may reimburse you (up to the policy limit) if you replace old materials in your home with green alternatives in the event of a loss or damage.
    • Green/LEED-certified homes may be eligible for insurance discounts. LEED stands for Leadership in Energy and Environmental Design and provides frameworks for cost-saving green buildings. LEED-certified homes must meet certain baseline requirements, however, there are additional categories within the framework that you can target for additional certifications.

    Examples of eco insurance coverage

    While eco insurance isn’t guaranteed to cover every green home improvement, there are some that may be evaluated and added into insurance policies. For example:

    • Coverage for vegetated roofs: Eco insurance policies may provide coverage for vegetated or “green” roofs. These innovative roof systems offer insulation and contribute to an overall healthier environment by helping reduce carbon monoxide emissions in the air and stormwater runoff causing flooding.
    • Green upgrades like solar panels: Solar panels convert sunlight into electrical energy that helps power the home. If your solar panel gets accidentally damaged or you decide to install one, your eco insurance policy may help cover some costs.
    • Sustainable building materials: As mentioned, clauses like the eco-friendly material replacement endorsement may reimburse you (up to your policy limit) for eco-friendly replacements.
    • Green living expenses: Certain eco insurance policies may cover additional living expenses if you’re displaced due to eco-friendly home improvements or repairs.

    How do I qualify for green home insurance?

    The qualifications for green home insurance may vary. They’ll likely depend on the insurance provider and policy. Green home insurance policies are an emerging product, and it’s still a relatively novel concept. The number of insurers that offer green home insurance discounts and add-ons to policies may be limited. However, some typical qualification factors may include:

    • Energy-efficient features in the home: Similar to energy efficient mortgages, homes equipped with energy-efficient features in the home, like LED lighting and smart thermostats, may qualify for green insurance discounts.
    • Sustainable building materials: Using eco-friendly materials during construction or renovation projects may be covered by your green home insurance policy, if you have one worked into your homeowners insurance policy already. If you don’t, it may be helpful to check with your provider or shop around for a new policy that may offer coverage in this area prior to making your upgrades.
    • Water conservation features: After a loss or damage to your water filtration or plumbing system, installing water conserving plumbing like low-flow toilets and rainwater harvesting systems may qualify for green insurance coverage.
    • Certifications or ratings: If your home meets certain environmental certifications or ratings, you may be eligible for a discount, premium or credit through a green insurance policy.

    In summary

    Green insurance is a relatively new product across the insurance industry as a whole — one that may provide benefits to homeowners. Green insurance is typically offered as an add-on or discount to a homeowner’s existing insurance policy. Do note that hazard insurance would still be a requirement (in addition to your green insurance) for lending purposes. Speak with your insurer to see if they offer any coverage benefits that might help support your future sustainability initiatives.

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    Have questions? Connect with a home lending expert today!

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