Insurance for “Green” Homes

It’s all about being eco-friendly or “green” these days, and that goes for home and auto insurance too. I read an article in the March 17th 2008 issue of Business Week that said “the insurance industry is jumping on the eco-bandwagon.”

You can now buy special “green” insurance policies that cover your home and even that hybrid car in the driveway. These new policies will pay to rebuild your home using green materials (in the event that it’s destroyed by a fire or other disaster). Right now there are only a handful of policies available and they’re only sold in certain states, but the trend is expected to grow.

What’s in it for the insurance companies? Apparently, there’s a “strong link [in] behavior that reduces greenhouse gas emissions and behavior that reduces the risks of accidents and damage” (in driving and home care). So, in other words the people who care about saving the planet are less likely to smoke in bed and swerve in and out of lanes on the freeway (surprise, surprise), and that means insurance companies are less likely to have to pay out.

Most of the discounts out there now are for owners of hybrids and other eco-friendly cars, but as mentioned there are some homeowners insurance policies too. Look into Lexington and Fireman’s Fund as outfits that will pay to rebuild with sustainable materials for an extra 2% to 3%. (Hey, you didn’t think a special “green” insurance policy would be cheaper than a normal one, did you? It’s because eco-friendly homes, which are made from materials that aren’t mass-produced, usually cost 3%-5% more to build.)

Examples of materials you could rebuild with are bamboo and sustainable-forested woods. And in the kitchen and laundry room, you’d put in energy-efficient appliances that have been rated by the federal Energy Star program.

Most of these home insurance policies are just rolling out this year. According to the article, “Lexington Insurance, an AIG subsidiary, launched its ‘Upgrade to Green Residential’ program in Northeast states in January and plans to go nationwide in March.”

You can also find green homeowners insurance policies (Lexington) that cater to folks who generate their own energy (for example, solar, wind, or geothermal energy). So if, during an accident, your energy-generating systems fail, you’d get an added premium of about 2% to cover the cost to purchase power elsewhere while getting permits and inspections to get your own systems back online.

So if building eco-friendly is something you’d like to explore, check with your local insurers for information on green homeowners insurance policies, because this is probably something we’ll see more of as time passes.

Green Home Valuation Trends – Genworth Mortgage Insurance