If your gravity-fed solar hot water system comes crashing through the roof of your straw-bale house, you'll need insurance to cover the damages. But the hard truth is that it can be slightly trickier to insure a green home than an energy-sucking, forest-killing, greenhouse-gas-emitting traditional structure.
Or it might not be. It all comes down to your definition of "green." For example, if your home meets the requirements set by the Leadership in Energy and Environmental Design (LEED) Green Building Rating System, your insurance may actually cost less, as long as you choose the right carrier. Fireman's Fund Insurance was the first to offer a 5 percent discount for LEED-certified homes, and some other companies are following suit. Of course, it's worth noting that building to LEED standards (including sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality) can add between a 4 and 11 percent increase to your construction costs [source: GreenBuildingSolutions.org].
In other green-building good news, major insurances companies including AIG, Traveler's Insurance, Zurich, and Chubb now offer policies that, for about $70/year per $1 million insured, allow you to rebuild with green materials after a loss to your current non-green structure [source: GreenBuildingElements.com]. The idea is that this should eventually make green building more common, which would decrease insurance costs for customers in the future.
That's the rosy side of insuring a green home. But not everything is so easy. The U.S. Green Building Council describes the challenge of insuring a green home this way: "Green building has presented challenges to insurance carriers stemming from the fact that green building design and construction is new. New things are tougher to understand from a historical loss perspective" [source: USGBC.org]. In other words, insurance rates are based on the historical cost of replacing the features of a non-green home.
But what about cork flooring? Or a gray-water filtration system? Or a recirculating system for centralized hot water distribution? As promising as these green features may be, there simply isn't enough historical data to inform insurance companies about the economics of replacing them when things go wrong. When forced to guess, insurance companies guess conservatively, and that means charging higher premiums in order to cover their risk.
That said, insurance companies are coming around. For example, Insurance.com quotes agents from both Farm Bureau Insurance and Nationwide discussing their companies' willingness to insure even straw-bale homes, noting that the insurance application doesn't even take straw into account [source: Insure.com]. But that's in Arizona, where insurance companies have wrapped their heads around straw bale. In other states, where straw-bale homes aren't as common, things are different. Some companies are reluctant to even issue policies for homes with support walls made out of straw bales, for example [source: Insure.com].
And it comes down to this: States and building codes differ. Insuring a LEED-certified home shouldn't be a problem. But every green step you take past what's required for that LEED certification may cost you. In the Wild West of green insurance, there are no hard and fast rules.
In about 2002, when we were looking for a home near Bozeman, Montana, my wife and I toured a house that seemed too good to be true -- it had square footage, acreage and was built to the owner's opinion of green best practices. It was also completely un-insurable; any buyer would have to pay cash. No insurance company would cover it. That was the end of our green buying experience, though I'm happy to report that in researching this article, I found that times are a-changing. The bar has shifted for insuring green homes and less extreme constructions including green materials and innovative techniques may not be the insurance death knell they used to be.
More Great Links
- Bittle, Joel. "The next green thing: green insurance." GreenBuildingElements.com. July 10, 2008. http://greenbuildingelements.com/2008/07/10/the-next-green-thing-green-insurance/
- English, Alyson McNutt. "Green insurance, the eco alternative." Bankrate.com. http://www.bankrate.com/finance/insurance/green-insurance-the-eco-alternative-1.aspx
- Insure.com. "Some companies will insure straw bale homes." Feb. 13, 2003. http://www.insure.com/home-insurance/straw-bale.html
- Insweb.com. "How to find a green home insurance policy." http://www.insweb.com/home-insurance/green-home-insurance-policy.html
- Kenealy, Bill. "Insuring green buildings: risky business?" Insurance Networking News. March 4, 2009. http://www.insurancenetworking.com/news/insurance_technology_underwriting_risk_green_building_risk11966-1.html
- Schultz, Jennifer Saranow. "Is green insurance worth the price?" The New York Times. March 11, 2010. http://bucks.blogs.nytimes.com/2010/03/11/is-green-insurance-worth-the-price/
- Tergesen, Anne. "Insurance goes green." Bloomsberg Businessweek. March 6, 2008. http://www.businessweek.com/magazine/content/08_11/b4075072486226.htm