Lowering Your Homeowner’s Insurance With a More Sustainable Home

Homeowners across the country spend an average of $1,083 annually on home insurance, with an average payment of $35 per month for every $100,000 in home value. However, in coastal areas or in places where extreme weather events are more likely, the expense for homeowner's insurance can increase dramatically. As an example, annual premiums increased by over $2,000 in hurricane-battered states like Florida. Finding ways to lower your homeowner's insurance while still maintaining needed protection is important for people, no matter where they live.

It is well documented that sustainable homes are more resilient to all different types of natural disasters. Recently, the home insurance industry began offering opportunities to lower your insurance premiums if you remodel or retrofit with sustainability and energy efficiency in mind. In this short article, Rise takes an in-depth look at how sustainable home construction can affect the homeowner's insurance products available to you.

Lower Premiums for 'Green' Homes

While most homeowners know that renewable energy options, energy efficiency upgrades, and other sustainable home features can save you money on your utility bills over the long-run, saving money on homeowner's insurance is usually not taken into consideration when calculating the potential savings and payback periods associated with sustainable home improvements. Are sustainable homes really eligible for lower insurance premiums?

One Midwest, home insurance provider, states that incorporating these measures to save water or energy in your house can reduce your premiums by up to 11%. The insurance industry is quickly learning that sustainable homes are generally safer and more resilient to disasters, both natural and human-made. Many insurance companies are familiar with LEED certification and are open to offering discounts for 'green' construction practices that incorporate:

• fire-resistance strategies
• improved home safety
• interior air quality
• increased home longevity through high-quality construction 

Some insurance companies may provide premium credits for homeowners who install specific mitigation devices that are often a central part of sustainable homes. Another way to receive lower premiums is through opting for storm-resistant construction techniques such as triple-pane windows with incorporated storm shutters.

From the perspective of a home insurance company, a sustainable home that includes high-performance insulation, backup battery power, insulated water pipes, and renewable energy option will be much less likely to suffer damages related to extreme weather and power outages.

Unfortunately, many insurance companies across the country still haven't updated their homeowner's insurance policies to incorporate considerations for the sustainable home. For that reason, the National Association of Insurance Commissioners (NAIC) recommends that homes built to certain environmental standards should have a policy that specifically provides a replacement to that same level. This reduces the risk that the homeowner won't have to pay extra out-of-pocket costs to reach those same standards.

What Aspects of Sustainable Homes Allow for Lower Premiums?

While each insurance company will have its own guidelines related to the specific sustainable home features that might allow for lower premiums, the following aspects are the most relevant for potentially lowering the cost of your homeowner's insurance policy.

No Gas Combustion in the Home

One defining characteristic of sustainable home construction is the lack of reliance on gas combustion. From heat pumps for heating your home to electric induction ranges for cooking, the lack of gas combustion in the home significantly reduces the possibility of residential fires. The US Fire Administration states that 36 percent of all house fires stem from cooking and heating, and gas combustion appliances are often responsible for those fires. The lack of gas appliances in the home can improve indoor air quality, thus decreasing the likelihood of health problems.

Increased Resiliency to Extreme Weather

As we mentioned above, homeowner's insurance policies tend to protect the home from the damage that can be caused by extreme weather events. Households that supply their electricity through solar panels and battery systems are less vulnerable to power outages caused by hurricanes, tornadoes, and severe winter weather.

LEED certification Benefits

The Fireman's Fund Insurance Co. of California, which has since been incorporated into Allianz Insurance, was the first insurance company to offer 'green' insurance coverage. For homeowners who had LEED-certified homes, this insurance company offered a 5-percent discount off regular annual insurance premiums. It helped other insurance companies across the nation discover that this practice was financially beneficial both to the homeowner and the insurance company.

Water Leak Sensors and Shutoff Devices

The Insurance Information Institute states that in 2016, water damage in homes accounted for nearly 30% of losses with an average loss of $9,633. Water leak sensors and shutoff devices are an essential part of the smart home. They can automatically shut off the water supply to a house when damage to pipes is detected. Water shutoff devices cost around $200 and thus could have a relatively quick payoff period if you were able to qualify for a lower insurance premium.

Smart Security Systems

Smart home security systems that incorporate sensors and monitors controlled remotely help lower your homeowner's insurance premiums by offering increased protection and security.

A 'Green' Homeowner’s Policy

Some types of green homeowner's insurance policies are designed to cover houses that already incorporate strict sustainability standards. Other types of homeowner's policies will allow you to replace any losses incurred on your property with more environmentally sensitive and sustainable options.

In general, a homeowner's policy will cover the cost of rebuilding a damaged home to green standards. This can include all different types of eco-friendly materials and building practices, including:

• Energy-efficient HVAC systems
• Upgrades to Energy Star appliances,
• LED lighting,
• High-performance windows
• Low flow water plumbing fixtures
• Improved insulation. 

This type of homeowner's insurance policy will also allow you to choose building materials with a lower embodied energy footprint, including incorporating recycled building materials into your home.

Farmers Insurance of Los Angeles is one company that offers this type of insurance policy. Their "Eco-Rebuild" policy allows homeowners to replace parts of their damaged home or property with more environmentally conscious materials. The Eco-Rebuild endorsement means that the insurance company will pay extra for you to replace your high-energy appliance with more efficient Energy Star models. In some cases, they will pay for the additional cost of recycling building debris rather than sending it to the landfill.

'Green' homeowner's insurance policies are unfortunately not available in all states or regions. You can check with your state insurance department to search for companies that do offer these policies in your state or province.

Article by:

Tobias Roberts

Tobias runs an agroecology farm and a natural building collective in the mountains of El Salvador. He specializes in earthen construction methods and uses permaculture design methods to integrate structures into the sustainability of the landscape.