Learn how homeowners insurance coverage works with solar panels

In a single day, the sun bathes the Earth with more energy than the world could use in an entire year. While capturing that is a real challenge, each year more and more people turn to solar panels in order to gather what they can. But unfortunately, solar panels are still an expensive addition to your home. So how can you protect your energy-efficient investment? Are solar panels covered by homeowners insurance? Today, we'll shine a little light on the subject, so read on!

About solar panels

For many years, solar panels were far too expensive to be a practical source for renewable energy for the common household. Not ten years ago, the cost for a residential system could exceed $50,000 - a price point well out of reach for most people, especially for an investment that takes a long time to pay off. 

But as with most things, the technology is improving, making it more affordable than ever. While the cost certainly depends on a variety of factors, on average a homeowner might pay $15,000 to $25,000. That's certainly still pricey, but more and more people are buying in. In fact, solar energy accounted for 40% of all new electricity generating capacity added in the US during the first quarter of 2020. 

Photovoltaic systems (or simply "solar panels") are a great way for both environmentally conscious and frugal people to minimize their reliance on non-renewable sources of energy.

But while they can certainly save on your electric bill over time, they have a substantial upfront cost, and are often at risk of being damaged by weather and other environmental factors. For this reason, it's essential for homeowners with solar panel systems to be able to protect their investment. 

Are solar panels covered by my homeowners insurance policy?

Good news! In most cases, you do not need a separate insurance policy to cover your solar panels; most insurance companies include such coverage in a standard homeowners insurance policy. Just like a deck, if a solar panel system attached to a house, it is considered part of the home, and would likely fall under the dwelling portion of your coverage (which is called "Coverage A").

Of course, if you are considering installing a solar energy system, or buying a home that has one already, it's important to speak with your insurance company first. They can help you understand how their policies work with solar panels, and tell you more about possible exceptions or exclusions that might exist in regards to covered perils, such as wind and hail.

What if my solar panels aren't attached to my house? 

Solar panels are often installed on the roof of the house for a few reasons. For starters, it's a great place to get a lot of sun! Beyond that, many residential lots simply don't have enough space to support them - it's hard to have a backyard BBQ with a solar panel array in the way!

That having been said, a separate solar panel installation isn't uncommon for those with the space. Furthermore, there are a growing number of other space-saving options, such as solar panel carports. In both examples, the panels aren't actually attached to the house, and therefore are not considered to be part of the home.

In these cases, it may be necessary to have a separate policy, or a policy add-on, as the dwelling portion of your homeowners insurance may not cover it. However, just as you can get coverage for detached garages, sheds, and other outbuildings, you can usually cover these types of solar panels with a rider or endorsement.

Will installing solar panels increase my insurance premium?

More than likely, your homeowners insurance premium will go up as you add solar panels to your house and coverage. Primarily, this is because solar panels are still quite expensive, and adding the replacement cost is likely to increase your coverage limit.

Your "coverage limit" refers to the maximum amount that your insurance policy will pay for a covered loss. In most cases, the higher your coverage limit, the higher your insurance premium will be. 

Before you hop on the solar train, make sure you talk to your insurance agent about coverage limits. Should a disaster strike, like a hurricane, you want to make sure the coverage limit of your policy is enough to repair both your home and your solar panels.

Other things to consider before installing solar panels

Beyond insurance policies, there are a few other things you may want to keep in mind before you invest money into a solar panel system.

Homeowners Association (HOA) rules. In Texas, certain laws limit the restrictions homeowners associations are allowed to place on the installation of solar panels. In other words, your HOA can't simply forbid you from installing them. However, they are allowed to implement certain guidelines for installation. Before you move forward with such a project, consult with your HOA or POA to make sure you understand what you're allowed to do.

Local rules and regulations. While some people install solar panel systems simply to power their homes, it is not uncommon for some to actually tie that system into the electrical grid. In some cases, this allows a homeowner to actually put excess electricity back into the grid and potentially get a credit for the energy supplied. However, any time you make an improvement or modification that taps into a power grid, the local city government is likely to have a few rules put in place. For example, some cities require that you have a licensed electrician perform the installation. 

Whether you're tapping into the power grid, or simply wiring your own house, it's important to research the rules and regulations of your local municipality. 



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