Are solar panels covered by homeowner's insurance?
Before incentives, a home solar panel system might cost around $20,000. That's a lot of value, so it's a really good idea to know your homeowner's insurance plan.
You’ve got homeowner’s insurance, right? If you have a mortgage, you almost certainly do, because lenders require it.
If you’re thinking of adding solar panels to your home or already have solar, it’s definitely a good idea to pull out your policy documents and get familiar with what is and isn’t covered. Insurance plans are personalized, so the coverage in your neighbor’s plan might not be the same as yours, even if you use the same company.
Because a solar panel system is either bolted to your roof or mounted in your backyard on a fixed structure, it is typically considered to be part of your premises and therefore covered by your homeowner’s policy. This means your solar panels may be covered for the hazards listed in your policy, such as fire, hail, and falling trees. However, every policy is different and coverages will vary, especially for hazards like hurricanes that tend to be region-specific.
In this article, I’ll include examples from my own homeowner’s insurance policy, but be sure to read your own policy and contact your insurance agency to let them know that you’ve added solar panels to your house.
How much is your home solar system worth?
The median size of a home solar system in the United States is 6.5 kilowatts, and the median price is $3.80 per watt before incentives. This means that a typical system might cost $24,700. But many homeowners go larger and end up with systems costing $30,000, or even $40,000.
It’s important to note that while you probably paid significantly less than this - the large majority of homeowners will be able to claim the 26% federal solar tax credit - when it comes to the insured value of the system, you are concerned with the gross value, before any incentives.
This is because if at some point you need to file a claim for the replacement of your system, there’s no guarantee that the incentives will still be there. This means that you might have to pay the full invoice price for a replacement system, without any rebates. For example, the federal solar tax credit was recently extended by two years, but is still set to expire after 2023.
While the price of solar continues to decline, it’s possible that a future replacement system might cost you more than what you would pay today.
Is your solar system covered by your homeowner’s insurance policy?
There was a time when a home solar system was considered exotic, but that’s not the case anymore. There are now about two million solar homes across the United States, so any of the large national insurers will be very familiar with solar. Unless your insurance company is a small local company, they will have experience with solar.
To know for certain if your system is covered, read your policy closely or, better yet, contact your insurance agency. I decided to change my insurance company last year, so I’ve had this conversation recently.
The agent explained that because a rooftop solar system is attached to the home, it’s considered part of the structure. This means that any of the hazards that your home is covered for also apply to the solar system. Here’s the relevant bit from my policy:
Property We Cover Under Coverage A:
1. Your dwelling, including attached structures. Structures connected to your dwelling by only a fence, utility line, or similar connection are not considered attached structures.
If you have a ground-mounted system in your yard, that should be covered as well. While I didn’t ask my agent about this, my policy includes the following:
Property We Cover Under Coverage B:
1. Structures at the address shown on the Policy Declarations separated from your dwelling by clear space.
A ground-mounted solar system is a structure that is permanently fixed to the ground with a foundation, so it would be covered under this clause.
Fire, lightning, wind, snow, and ice: hazards that might damage your solar panels (and home!)
Homeowner’s insurance will cover most natural hazards, such as lightning, snowstorms, and hailstorms. As far as a solar system is concerned, some of these pose greater risks than others. Lightning damage is very rare, but could be more of a worry in lightning-prone areas such as the midwest, or if you live in a rural area with fewer tall structures around you.
While solar panels are specifically tested to withstand severe hail, freakishly large hailstones do occasionally happen, and could shatter the glass on your panel.
Fire, lightning, wind, and hail are all covered under my policy:
Losses We Cover Under Coverage C:
We will cover sudden and accidental direct physical loss to the property described in Personal Property Protection–Coverage C caused by the following, except as limited or excluded in this policy:
1. Fire or lightning.
2. Windstorm or hail.
Hurricanes might be an exception in your policy
Hurricanes deserve a special note, because it’s a particular hazard in many parts of the United States. Allstate says that wind damage is often excluded in standard homeowner’s policies. If you have an add-on policy with your insurance for wind damage, check to see if solar panels are included.
Things that might fall onto your solar panels: trees, softballs, rocks, and other things
If a tree falls on your solar panels, it should be covered. My policy lists “Falling objects” as a covered hazard. Do you live near a baseball diamond or golf course? If a stray ball shatters one of your panels, that should count as a falling object and be covered.
Have some brats in your neighborhood? Maybe your solar panels are visible from the street, and one of them thinks they make good target practice. If someone were to whip a rock at my panels, that would be covered in my policy under “vandalism and malicious mischief”.
What if somebody tries to steal your solar panels?
It might seem a little ridiculous, but it’s conceivable that if you had a ground mounted solar panel system with microinverters, the system could be a target for theft. While solar panels are too cumbersome to be a practical target for theft, microinverters are small devices that cost about $150-200 each and are mounted alongside each panel. I’ve never heard of it happening, but with a battery operated tool, I imagine that a thief could remove all the inverters from a ground mounted system in fairly short order.
Theft of solar equipment would be covered under my policy:
Theft, or attempted theft, including disappearance of property from a known place when it is likely that a theft has occurred. Any theft must be promptly reported to the police.
Not covered under homeowner’s insurance: rodent damage to your solar panels, or wear and tear
Unfortunately, one of the most common hazards to solar panels isn’t covered by my homeowner’s insurance: rodent damage.
Pests, in particular squirrels, are a surprisingly common hazard. In my case, I’ve found squirrels nesting under my panels on multiple occasions. I’ve promptly removed them myself, but if I didn’t, it’s likely that they would have ended up chewing on the cables and causing extensive damage. This is such a common issue that I wrote a whole article about it.
Pest damage is so common that homeowner’s insurance usually won’t cover it, but check your own policy. If you have a lot of squirrels in your area, I would strongly recommend squirrel guards. (See my squirrel article for equipment recommendations.)
Wear, tear, and normal solar panel failure isn’t covered
While it would be nice if your homeowner’s insurance covered you if your solar panels failed due to a product defect or age, it most likely doesn’t. Wear and tear of your panels is your own expense, although with an expected 25 year lifespan, this should be a lesser concern. If your panels fails, look to your installer or manufacturer’s warranty for coverage.
If you bought solar panels, you may need to adjust your coverage limits
As mentioned at the start of this article, solar panels are a big investment and add significant value to your home. To be safe, once you’ve installed solar panels on your home, be sure to contact your insurance agency. It’s a very good idea to have it noted on your policy that you have solar panels. They will ask you about the size of your solar system so that your insured property value is updated correctly.
The increased value may cause your premiums to rise slightly.
Bottom line: update your homeowner’s insurance as soon as you add solar panels to your home
Fortunately, for most homeowners, their insurance will policy will cover many types of damage that might happen to their solar panels, such as falling trees, hail, and stray softballs. The one notable exception is pesky rodents, so I strongly recommend installing critter guards if you have squirrels in your rea.
I’ve used examples from my own insurance policy, but yours will be different. Be sure to reach out to your insurance company when you get solar panels installed to let them know you’ve updated your home, and to find out what hazards are covered under your policy.