More and more homeowners may be considering making the change to powering their homes with solar panels. But what does that mean for homeowners insurance?
Residential solar power use had a record quarter in the third quarter of 2022, with nearly 1.6 gigawatts of solar photovoltaic (PV) capacity installed, according to the Solar Energy Industries Association. And with last year's Inflation Reduction Act that expanded the Investment Tax Credit (ITC) to provide a 30% tax credit to those who install a PV system before 2032, according to the Office of Energy Efficiency & Renewable Energy, many more homeowners may be considering making the change.
Even after taking the federal solar tax credit into account, a residential solar panel system costs approximately $20,000 on average in 2023, according to an Energy-Sage study, which is less than half the average cost of $50,000 in 2013.
“With the tax credits that are in place, I think that this is a great time to get solar—the cost of solar technology has come way down," says Michael Giusti, analyst at InsuranceQuotes.com, who made the leap to get solar panels on his own house last year.
On the most basic level, “anything that's permanently attached to your home is covered by homeowners insurance, so homeowners insurance should cover solar panels," he says, also noting that installing solar panels increases a house's value and therefore will increase the premium. “Some policies say, 'Not so fast—solar panels are this new thing with these unknowns, so we're going to specifically write them out of the policy.'"
“Just make sure that you're communicating with your insureds so no one's surprised after they've already made the investment," he says.
Carriers' concerns include hail and wind damage, but Giusti points out that solar panels are engineered to take some damage, with most certified to withstand 140 mph winds. And thanks to the Department of Energy's SunShot Initiative, solar panels undergo extensive testing, including shooting ping pong-sized ice balls at them at 70 miles per hour, according to energy.gov.
“The quirk is that it's probably less risky to have the solar panels," Giusti says. “Shingles and tar paper are just put on by a roofing nail, whereas solar panels are bolted to the roofing rafters with lag bolts. It doesn't take an engineer to know that a lag bolt beats a roofing nail in a windstorm."
As solar increases in popularity and carriers gather more underwriting data, “we're going to find that some of these exclusions are going to fall off," he says. “Right now, though, it's certainly worth talking to your carriers and reading that policy really closely if an insured wants to get solar panels."
Looking ahead toward residential energy-efficient trends, Giusti highlights lithium-ion battery storage for solar panel systems. “They're not widespread yet, but I think they're going to become a bigger part of these solar installs," he adds. “When people begin to attach a 10-to 20-kilowatt lithium-ion battery to their house, there's a natural fire hazard. With this young technology, will insurers take that fire hazard into account? Is this an unknown that they aren't going to like? Or will the batteries be Underwriters Laboratories (UL) listed and everyone will be happy? We don't know yet."
AnneMarie McPherson Spears is IA news editor.