Aug. 13, 2013
This article was contributed by Carrie Van Brunt-Wiley, Editor of the HomeInsurance.com blog.
Reducing Risk in the Sustainable Community
The Greensburg story of recovery is amazing. The community's emergence from the nearly total devastation of the May 4, 2007, tornado, and its dedication since then to sustainable building has been inspiring.
The good news for homeowners who have rebuilt their homes with sustainable materials and systems, is that many of the tenets of sustainable building also reduce your home’s risk of being damaged due to severe weather and other unexpected events. Furthermore, homes that are at a lower risk for damage also often qualify for the most preferred homeowners insurance policies- translating to the most comprehensive coverage and competitive rates.
Folks in Greensburg – the town with the most LEED-certified buildings per capita in the world – know something that other people across the country probably don't. Construction of homes with sustainable materials, when green design is included from the beginning of a project, costs only about 2% more than conventional construction. That's according to a study
done for more than 40 California state agencies. That additional cost is more than recovered over the life of a green home due to lower electricity and water costs alone.
Since the replacement cost of a home greatly affects the amount of coverage a homeowner must purchase, insurance carriers typically require homeowners who want their homes rebuilt with green materials to purchase an endorsement on their policy to cover additional costs in the event of a claim. While this can slightly increase the cost of insurance, carriers help to counteract that additional cost by offering some green certified homes a 5% discount.
On top of that, green homes typically also qualify for preferred policies, which equates to better premiums.
- For example, one way that homes gain points toward LEED certification is by having roofs that are constructed with reflective aluminum or steel on 75% of their surface. Those roofs also prove to be fire resistant and highly durable against weather conditions such as wind and hail. Even a non-LEED certified home that is built with new energy efficient roofing materials can qualify for a preferred policy.
- Green homes also typically employ water-efficient toilets and other updated plumbing to reduce the amount of water they use. Because modern plumbing systems also reduce the chances of a burst pipe or other incident that could lead to costly water damage, insurers consider them lower risks.
- Sustainable homes usually employ updated electrical and HVAC systems designed to use less energy. Modern systems also greatly reduce the risk of house fires, one of the most costly sources of residential insurance claims each year.
All in all, sustainable building can help lower an individual homeowner's costs. In addition, it may also help lower rates across the entire market. Insurance carriers' rates are based on being able to cover their losses in the event of a claim. In fact, the Insurance Information Institute reported that 92% of the $62 billion paid in homeowners insurance premiums in 2011 went towards paying claims. If sustainable construction reduces the frequency and severity of claims filed, it just may help throttle future rate hikes.
Green home owners who want to take advantage of all available homeowners insurance discounts should talk to their insurance agent about the discounts and coverage options available to them.
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image credit: sfgate.com