Does my insurance policy cover solar panels?

Let there be light

Driving around, you may have noticed an increasing number of neighbors and business owners installing solar panels (Photovoltaic (PV) systems) on their buildings. Municipalities have been offering tax credits and various solar companies offer many different financing options that have contributed to the proliferation of these systems.

With an increasing number of people looking to reduce their carbon footprint and save some money on their energy costs, these systems will continue to sprout up. If you are considering adding a solar array to your property a call to your insurance agent is a must. Any savings realized by these PV systems can quickly be lost by an uncovered claim.

Insuring the panels themselves

While the panels may be covered by a warranty, that usually only protect the building owner from manufacturing defects and design. If the panels are damaged due to falling debris, fire, flood, or any other covered peril, your homeowners or commercial property policy would generally respond to such an incident. If you are relying on your insurance policy to cover your PV system, there are some specific things you should consider:

Do you have enough coverage? A PV system can be an expensive addition to your building. With the value of a completed system easily costing tens of thousands of dollars, you may need to increase the insured value of your building. Most homeowners and commercial property policies require that your building be insured to its full value. Adding an expensive PV system can easily increase the total value of your building and throw your insurance to value ratio out of compliance. If a claim occurs and the building is found to be underinsured, you may be facing a coinsurance penalty leaving you unable to be fully indemnified for the cost of your claim.

Where are the panels located? If the PV system is attached directly to your roof they will be considered part of your building and will be picked-up by your coverage A (dwelling) on your homeowner’s policy. On your commercial property policy, your building coverage or tenant’s betterments and improvements coverage should respond if there is proper building coverage in place.

What if you install the panels on a detached garage or carport or stand-alone on your property? Your homeowner’s policy automatically provides coverage B (other structures) coverage which starts at 10% of your dwelling coverage. So, if your home is only insured at $200,000 that would equate to $20,000 coverage for your detached structures. If your solar panel is valued at $25,000 and your detached garage were to burn down you are already underinsured for the panels themselves and still must account for the cost of replacing the structure itself. Unlike homeowner’s policies, commercial auto policies don’t automatically cover other detached structures. If your attached your PV system to a detached structure or stand-alone on your property, you must schedule that separately to have any coverage at all.

Other considerations

Equipment breakdown coverage in not automatically included. Most property policies generally exclude coverage for loss or damage caused by electrical and mechanical breakdown. Mechanical breakdown can occur because of improper testing or installation, corrosion heat or humidity, or even by animals damaging wiring or other components. If a fire were caused because of a breakdown of the panels themselves and were to damage you building and personal property, without the proper equipment breakdown coverage you may have no coverage to respond to the claim at all.

Business interruption is something to consider for revenue generating systems. Most homeowner’s will not be relying on the income generated by their PV system, but for larger commercial operations, business interruption coverage is an important coverage. The cost of installing a large PV system is many times financed based on the revenue it generates. Solar panel technology is constantly evolving, which could make finding replacement parts for your installed system difficult. If a critical component is damaged by a covered peril and is not easily replaced you could face extended downtime resulting in a significant loss of revenue.

Don’t get left in the dark, call Shove Insurance today and we will review all your potential exposure and provide you with an insurance proposal that will give you piece of mind that your investment is protected.