How installing solar panels can impact your home insurance

Solar panels can be a great investment, reducing energy costs and lowering your home’s carbon footprint. However, they also come with considerations for your home insurance. Homeowners may be surprised to learn that adding solar panels to their property can increase their home insurance premiums – and in some cases, they may not be insurable at all.

Here, we've broken down how solar panels interact with home insurance policies, what you need to know about coverage, and how to ensure your investment is protected.

What are solar panels?

Solar panels, or photovoltaic (PV) panels, convert sunlight into electricity. They can be installed on rooftops or ground-mounted systems to power your home and reduce reliance on traditional energy sources.

By generating renewable energy, solar panels can significantly cut electricity costs and even earn homeowners tax credits or rebates in some regions. However, their value and installation introduce unique considerations for homeowners, especially concerning insurance.

How do solar panels impact home insurance coverage?

Most standard home insurance policies cover solar panels if they are attached to the home structure under the dwelling or structure section. Here’s how this works:

1. Coverage inclusion: If your solar panels are permanently attached to your home, they are typically considered part of the dwelling. This means they’re covered for risks like fire, wind damage, and theft.
2. Coverage limits: The total coverage amount for your dwelling may need to increase to account for the added value of solar panels. Without adjusting your policy, you risk being underinsured.
3. Exclusions: Some policies may exclude coverage for solar panels damaged by specific events, such as hail or windstorms, especially if they’re not installed according to local building codes. 

It’s also important to note that if the solar panels are not attached to your home, such as a ground mounted panel, then your insurance may not provide coverage. If they do offer protection, it may be included under the other structures section of your policy.

Leasing vs renting vs buying is also a decision criteria that may impact your home insurance needs. Depending on what path you choose will determine if you need to invest in personal coverage. A lot of rental companies provide coverage for the panels under their own policy, while a leasing company may mandate that you insure the panels. Of course if you decide to purchase outright, just like buying a home, it is 100% your decision on whether to insure your property.

Ultimately, we recommend consulting with your insurance broker or agent before making a decision on adding a solar panel to your property. You want to know what your options are before committing.

Do solar panels increase home insurance premiums?

It’s not necessarily a yes or no answer, it actually is very much dependent on your insurance company and how the panels have been added to your property.

Some carriers may view the addition of mounted roof solar panels to your home as an increase to the replacement value, which can result in a higher premium. Reason being, the more it costs to replace or rebuild your property, the more it costs to insure.

For example, if your home is insured for $500,000 and you add $30,000 worth of solar panels, your insurer may adjust your dwelling coverage to $530,000. This adjustment ensures the panels are included in your policy’s coverage limit.

The other premium consideration is if you chose to implement a ground mounted panel system detached from your dwelling, then you need an add-on to your coverage or a separate policy for your solar panels. The same applies to a solar panel carport, a freestanding structure that may require a separate policy or endorsement. The cost to insure will be based on your carrier's rules and the value of the system - there may also be coverage limits on how much the home insurance company is willing to insure.

What to consider when insuring solar panels

Before installing solar panels, it’s essential to understand how they’ll impact your home insurance and what steps you can take to protect your investment.

1. Verify installation requirements

Improper installation could void your warranty and affect insurance claims. Ensure your solar panels are installed by licensed professionals and comply with local building codes.

2. Check policy details

Review your home insurance policy to confirm solar panels are covered. Ask your insurer:

• Are solar panels included in the dwelling or personal property section?
• Are there exclusions for specific types of damage, like hail or wind?
• Is additional coverage, such as a rider, required?

3. Consider adding riders or endorsements

If your existing policy doesn’t fully cover solar panels, you can add a rider or endorsement to address gaps. These policy add-ons can ensure coverage for risks specific to solar panels, such as electrical faults, flood damage, vacant property, but generally maintenance related damage is not covered as it’s viewed as preventable.

Risks and challenges of solar panels

Solar panels come with risks that may impact your home insurance, including:

Weather-related damage

• Panels are vulnerable to hail, wind, and debris. While standard policies may cover these risks, some areas prone to severe weather might have exclusions.

Electrical issues

• Faulty wiring or inverter malfunctions can pose a fire hazard. Proper maintenance and routine inspections can reduce this risk.

Theft or vandalism

• High-value panels can attract thieves. Some insurers may require additional security measures, such as fencing or surveillance cameras, for coverage.

How much does it cost to insure solar panels?

The cost of insuring solar panels depends on factors such as:

• Replacement value: The higher the cost of your solar panels, the more coverage you’ll need.
• Location: If you live in an area prone to severe weather or theft, you might pay more for coverage.
• Policy type: Some insurers include solar panels in standard home insurance, while others may require additional endorsements.

Example: If your solar panels add $25,000 to your home’s value, and your insurer charges $5 per $1,000 of coverage, your premium might increase by about $125 annually. We recommend shopping for home insurance quotes that include solar panel coverage in order to find your best deal.

What to consider before installing solar panels

Solar panels can offer substantial savings and environmental benefits, but it’s crucial to evaluate how they affect your financial and insurance situation.

1. Review your home insurance coverage options

Check your policy’s dwelling coverage limit or book a call with your insurance provider to determine whether your coverage accounts for the value of solar panels. If it doesn’t, request a quote for the adjusted or added coverage.

2. Understand the installation’s impact

Solar panels must be properly installed to avoid voiding warranties or insurance claims. Choose a certified installer and verify compliance with local building codes.

3. Weigh maintenance costs

Solar panels require periodic maintenance, such as cleaning and inspecting for wear and tear. Routine upkeep can prevent costly damage and maintain insurance coverage eligibility. Remember, wear and tear are not covered by insurance, so routine maintenance is important.

Advantages of solar panels for homeowners

While solar panels may slightly increase your insurance premiums, they offer significant benefits:

• Reduced energy costs: Lower utility bills can offset the additional insurance expense.
• Tax incentives: Canadian government green energy financial support to encourage installation and use of solar.
• Environmental impact: Solar panels help decrease reliance on fossil fuels.

Increased home value: Energy-efficient homes with solar panels often sell for higher prices.

Drawbacks to consider

Despite their benefits, solar panels have some potential downsides:

• Initial cost: High upfront costs may deter some homeowners - EcoWatch states that the average cost of solar panels in Ontario is about $17,350 for a 5-kW system and $34,700 for a 10-kW system.
• Insurance complications: Not all policies fully cover solar panels, requiring additional research or endorsements.
• Weather vulnerability: Panels are susceptible to hail, wind, and debris damage, which can be excluded from insured coverages.

The bottom line: Are solar panels worth it?

Solar panels are a smart investment for many homeowners, offering long-term savings and environmental benefits. However, they also add complexity to your home insurance. Ensuring your panels are properly installed, regularly maintained, and fully covered by your insurance policy is essential.

Before installing solar panels, discuss your plans with your insurance provider to confirm adequate coverage is available and you understand the cost implications. If your current policy doesn’t meet your needs, it’s time to consider shopping around for a new provider or adding endorsements to fill any coverage gaps. It all comes down to educating yourself before making the investment.

Also read:

• The average cost of home insurance in Ontario
• Climate change and its impact on your insurance
• How to save money on utilities