Are Solar Panels Covered by Home Insurance?

The adoption of solar energy for homes has grown significantly across the United States. As more homeowners consider installing solar panels, a common question arises: are these additions covered by existing home insurance policies? Solar panels can be covered, but the extent of this coverage can vary based on the policy and the system’s specifics. Understanding these nuances is important for protecting such an investment.

Standard Home Insurance Coverage

Solar panels are generally integrated into a standard homeowners insurance policy. For panels mounted directly onto the roof, they are typically considered part of the “dwelling” coverage (Coverage A). This means they are treated as an integral component of the home’s structure, similar to the roof itself.

Ground-mounted solar arrays, or those not directly attached to the main dwelling, are usually covered under the “other structures” portion of a policy (Coverage B). This category typically includes detached garages, sheds, or fences. It is important to confirm with an insurer how such systems are classified, as coverage limits for “other structures” might be a percentage of the dwelling coverage, often around 10%.

Standard homeowners insurance policies typically cover solar panels against common perils. These often include damage from fire, windstorms, hail, lightning strikes, theft, and vandalism. Coverage also usually extends to damage caused by falling objects, such as tree branches. These protections help safeguard the investment in a solar energy system.

A distinction exists between owned solar panel systems and those acquired through a lease or power purchase agreement (PPA). If a homeowner owns the solar panels, their homeowners insurance policy is generally responsible for covering the system. However, if the system is leased or part of a PPA, the leasing company or third-party owner typically retains responsibility for insuring and maintaining the panels. The homeowner’s policy would not cover a leased system, as ownership remains with the leasing company.

Common Exclusions and Limitations

While homeowners insurance generally covers solar panels, policies often contain specific exclusions and limitations that can affect coverage. Standard policies typically do not cover damage resulting from wear and tear, gradual deterioration, or manufacturing defects. Similarly, issues arising from faulty installation are usually not covered unless the damage is a direct result of a covered peril, such as a fire caused by an electrical malfunction.

Natural disasters like floods and earthquakes are common exclusions in standard homeowners insurance policies. If solar panels are damaged by these events, separate flood insurance or earthquake insurance policies are typically required for coverage. Without these specific endorsements or standalone policies, the homeowner would bear the full cost of repairs or replacement.

Another important consideration is how insurance companies value damaged solar equipment, typically either at Actual Cash Value (ACV) or Replacement Cost Value (RCV). An ACV policy will pay out the depreciated value of the solar panels at the time of loss, accounting for their age and condition. In contrast, an RCV policy covers the cost to replace the damaged panels with new ones of similar kind and quality, without deduction for depreciation. Choosing RCV coverage can provide more comprehensive protection for the investment.

Deductibles also apply to solar panel claims, meaning the homeowner is responsible for paying a predetermined amount out-of-pocket before the insurance coverage begins. For example, if a policy has a $1,000 deductible and a $5,000 repair is needed for solar panels, the homeowner would pay the first $1,000, and the insurer would cover the remaining $4,000. Understanding the deductible amount is important, as it directly impacts the immediate financial responsibility after a covered loss.

Maximizing Your Coverage

Homeowners should proactively engage with their insurance provider to ensure adequate protection for a solar panel system. It is important to inform the insurer before or immediately after installing solar panels. Failing to notify the insurance company about a significant home improvement can potentially lead to issues with coverage or even denial of a claim in the event of damage.

Homeowners should review their existing policy limits, particularly for dwelling and other structures coverage, to ensure they are sufficient to cover the added value of the solar system. The installation of solar panels increases the overall replacement cost of the home, necessitating an increase in coverage limits to avoid being underinsured. While this might lead to a modest increase in premiums, it helps guarantee full financial protection.

Considering specific endorsements or riders can further enhance coverage for solar equipment. For instance, equipment breakdown coverage can protect against mechanical or electrical failures not typically covered by standard perils. Coverage for power surges can also be a valuable addition, safeguarding sensitive electronic components within the solar system. These specialized endorsements can fill gaps left by basic policies, offering broader protection.

Consulting directly with an insurance agent is a valuable step in tailoring coverage to specific needs. An agent can help evaluate the current policy, explain how the solar panels will be covered, and recommend any necessary adjustments or additional endorsements. This personalized guidance ensures that the solar investment is adequately protected against potential risks.