Installing solar panels on your home can reduce electricity costs and environmental impact. But many homeowners wonder – will adding solar panels increase my home insurance rates?
The relationship between solar panels and insurance premiums is complex. While solar panels do not directly cause rate hikes, there are some indirect factors to be aware of.
Do Solar Panels Directly Increase Home Insurance Rates?
The simple answer is no – installing solar panels does not automatically lead to higher home insurance premiums. There are several reasons why:
Solar panels don’t increase risk – Insurers view solar panels as protective assets rather than added risks. They don’t cause fires or other covered losses.
Underwriting rules don’t change – Homes with solar get rated using the same criteria as regular homes. Solar homes aren’t put in a pricier risk tier.
Claims experience is favorable – Data shows solar homes don’t file more frequent or expensive claims. Loss patterns are similar to non-solar homes.
State laws prohibit discrimination – Some states prohibit underwriting based on legal home upgrades like solar panels.
So directly, solar panels are neutral when it comes to insurance rates. However, there are some indirect impacts to be aware of.
Solar Panels May Indirectly Increase Rates – Here’s How:
While not a direct cause, solar panels can indirectly lead to small premium increases through these avenues:
Higher home value – Solar often increases property value, which raises rebuild costs used to calculate dwelling coverage limits. Higher coverage = higher premiums.
Supplemental coverages – Additional riders or endorsements like equipment breakdown or water backup coverage may be prudent with solar systems. These raise costs.
Claims for solar damage – Frequent claims for hail damage to solar panels in your area could cause insurers to raise rates for all policyholders.
Higher liability limits – Umbrella liability coverage is often recommended to protect against risks if your solar panels fail. More liability coverage increases premiums.
Loss of discounts – Sometimes adding solar panels makes homeowners ineligible for certain discounts like hurricane fabric, wind mitigation, or age of home.
Let’s explore each of these indirect factors more in depth:
Increased Dwelling Coverage Due to Home Value Appreciation
One of the biggest indirect impacts is that adding solar often significantly increases the value of your home. Average home value appreciation with solar panels installed ranges from about 4-8% according to Redfin data.
Since homeowners insurance dwelling coverage is based on replacement cost, if your home value goes up so does your coverage limit requirement. And higher dwelling coverage limits mean higher premiums.
For example, say your home is currently worth $300,000. Going solar boosts the value to $324,000. If your dwelling limit was previously $180,000, your insurer will likely now mandate $220,000 minimum to fully cover the new appreciation, increasing your premiums.
Extra Endorsements and Supplemental Coverages
With the complexity of solar systems, many insurers recommend enhancing your homeowners policy with extra endorsements to fill coverage gaps. Common ones include:
Equipment breakdown – Covers electrical or mechanical failure related to the solar system which standard policies exclude. Adds about $50 annually.
Water backup – Solar systems are prone to water damage if rooftop seals fail. This endorsement adds protection. Increases premiums around $40 per year.
Global endorsement package – Some insurers offer a single endorsement that packages together extra coverages tailored for solar homes. Expect prices around $150 annually.
While each individual endorsement is affordable, together they can incrementally increase your total insurance costs.
Regional Rate Hikes After Multiple Solar Damage Claims
If your area experiences frequent hail storms, thunderstorms, or other severe weather that routinely damages solar panels, insurers may react by raising rates for all policyholders to recoup higher claim payouts.
For example, say a massive hail storm causes $2 million in solar panel damage across 500 homes in your town. To remain profitable, insurers may need to hike rates by 6% the following year to account for the claims activity.
However, regional impacts like this are infrequent. Nationwide, insurers report minimal claims activity from damaged solar equipment. But localized severe weather could trigger a response.
Higher Liability Limits Recommended
Standard homeowners policies provide $100,000 to $300,000 in liability coverage. But if your solar panels fail and cause significant damage to a neighbor’s home, higher limits are advised. Umbrella liability policies that add $1 million or more in extra coverage are often recommended for solar homes, adding $150-$300 to annual premiums.
Insurers want to ensure solar risks like electrical fires, leaking batteries, or faulty installations don’t expose you financially. Higher liability limits are prudent.
Loss of Some Discounts
Certain homeowners discounts like Hurricane Fabric on roof openings or Florida Wind Mitigation credits require removing solar panels for inspection and re-installation afterwards. The hassle sometimes causes solar owners to forfeit the discounts.
Additionally, some insurers give an “age of home” discount. If your house is only 5 years old but you add brand new solar panels, you may lose this discount due to the panels making the home exterior technically no longer new.
However, these cases are not the norm. Most discounts can still be claimed with solar panels installed. And some companies even offer “green energy” discounts.
What Increase Can I Expect from Solar Panels?
With solar not directly affecting rates, how much do typical premiums rise based on the indirect impacts discussed?
Most homeowners see premium increases of 2-8% after installing solar panels. However, amounts vary significantly based on:
- How much home value appreciates after adding solar
- How many supplemental coverages you add
- If severe weather leads to regional rate hikes
- How much liability coverage you purchase
A modest 4% premium bump is common. But if you lose discounts, buy lots of endorsements, and greatly increase dwelling coverage, your increase could reach up to 8-10% in rare cases.
Here are some examples of potential premium increases from solar panels based on different home and coverage scenarios:
|Total Premium Increase
|Goes up $20,000
|Dwelling increased 10%
|Goes up $50,000
|Dwelling increased 20%
|Water backup, equipment breakdown
|Goes up $100,000
|Dwelling increased 30%
|Water backup, equipment breakdown, $1M umbrella liability
While percentage hikes may initially sound high, in terms of real dollars the impact is typically quite minimal. For a policy of $2000 annually, even a 10% solar increase only amounts to $200 extra per year which will likely be offset by electricity savings.
Model Scenario: Premium Impact of Going Solar
Here is a modeled scenario to show the typical insurance premium increase from adding solar panels:
- Current home value: $350,000
- Home insurance dwelling coverage limit: $210,000
- Current annual premium: $1,500
The homeowner installs a $20,000 solar system.
- Home value increases to $370,000 after solar installation based on appraisal
- Dwelling coverage rises to $220,000 after re-inspection
- Insurer suggests adding equipment breakdown and water backup endorsements, costing an extra $140/year
- Total premium rises to $1,640
Result: The solar panels indirectly caused a $140 annual increase, or 9%. But they boosted home value by $20,000.
How to Minimize Rate Increases from Solar Panels
While most increases are modest, you can take these steps to help minimize the impact of going solar:
Maintain all discounts, even if roof re-inspection is required after solar installation
Only add supplemental coverages your insurer confirms are absolutely necessary
Shop multiple insurers and compare solar pricing
Set high deductibles to keep dwelling limits (and premiums) lower
Don’t buy umbrella liability coverage in excess of what you actually need
Ask about “green energy” discounts for eco-friendly solar homes
Review premium changes each renewal and request an explanation for any increase
Being an informed and proactive policyholder is key to controlling costs.
Solar Panel Insurance Claim Filing FAQ
If your solar panels are damaged, here are some common questions about filing an insurance claim:
Do I need a separate solar panel warranty claim before filing an insurance claim?
Solar panels come with manufacturer warranties against defects and degradation. Make this warranty claim first before filing an insurance claim for wind, hail, lightning or other physical damage.
Can I get reimbursed for lost solar power generation while panels are being repaired/replaced after a claim?
No, home insurance only covers the cost of physical repairs. Lost energy production during the restoration process is not reimbursable.
Does My Home Insurance Cover Solar Panels?
Do solar panels raise home insurance?
Does your property value go up with solar panels?
Is it harder to sell a house with solar panels?
Why do insurance companies ask if you have solar panels?