Doing the math on green insurance

"Green insurance" will pay for green energy upgrades to any home covered by standard homeowners insurance. Image: Flickr / mikecogh / CC-BY-SA

In more than half of states, it is possible to attach a “green insurance” rider to homeowners policies. These policy riders pay out for “green” upgrades to homes in the event of an insurance claim.

The basics of green insurance

Green insurance is simply an add-on or rider added to an existing home insurance policy. These riders increase the monthly cost of general homeowners insurance. In the case of an event where the home is damaged or destroyed, the insurance rider pays out the additional cost it takes to make the repairs in a “green” way. This includes everything from recycling building materials to rebuilding in a LEED-certified manner.

The cost of green insurance

Green insurance riders can cost anywhere from an additional $25 per year to $50 per month for an average single-family home. The likelihood that a homeowner will actually need to use the insurance is relatively low, which means that the likelihood that a green insurance rider will get used is even lower. However, in the event that something does happen to the home, the cost of the upgrades that green insurance can make easily run into the thousands of dollars. While only you and your insurance agent can determine what is right for you, some basic math can be a good guide. An additional $25 per year, over 30 years, is an additional $750 for coverage, which would be made up if the damages and upgrades do eventually happen.

How going green can save money

Green insurance riders may save you money on green updates to your home in the case of damage. Other green updates to your home can save you money in the long run. Environmentally friendly upgrades to your home or vehicle can actually reduce the cost of insurance. If you make any big upgrades to your home, check with your insurance agent to see if those upgrades will reduce your insurance cost. The same goes for vehicle owners, as many insurance companies have found that hybrid vehicle owners are less likely to be involved in dangerous driving habits than the standard population.

Sources

NY Times
Bankrate
The Insurance Expert

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