Insuring Your Solar System

Insuring Your Solar System

Your solar PV system is finally ready to install, and it’s time to look at insurance. We can offer suggestions, but ultimately it is up to you and your agent to choose what you feel is an acceptable level of insurance for your system. Your agent will be able to guide you on the amount and type of insurance needed. The Aquilla staff is always happy to work with your agent if they have any specific questions related to your system.

When the solar system is first installed, the utility requires that the homeowner carry a $300,000 liability insurance policy to interconnect to the grid. They may also require to be listed as additional insured on your policy. This is separate from the system insurance.

If a system is a roof mount attached to your home or other structure, it is typically covered under your homeowner’s insurance. You should inform your agent that solar panels have been professionally installed by Aquilla Solar and needs to be included under your homeowner’s insurance. If your agent determines that there is enough insurance under your policy, there is nothing else that is required. If they feel that additional insurance is needed, then you can discus the options for valuation of the system. Below is an example of how you might value your system.

Example of system cost basis for insuring (%)

Initial System cost:           $30,000 (100%)

Minus 30% FTC:                  – 9,000 (30%)

Minus soft costs & labor:  -10,000 (33%)

Buffer for clean up:             +4,000 (13%)

Total insurable value:       $15,000 (50%)

If your panels were part of a special rebate program, it is important to understand that those rebates initially cause an inflation of solar panel prices, at times over 400%! Most programs will let you substitute a comparable solar panel, of the same wattage, without the inflated rebate cost. For a real world example: a Made in Minnesota solar panel bought and installed in 2016 might have cost your installer $445. It can now be replaced by a 2017 comparable panel costing $98. So the drop in solar panel prices might immediately be more than a 50% drop in system value as soon as the credits are claimed. Just like the value of a brand new car drops as soon as you drive it off the lot.

Things typically not insured on a PV solar system, including soft costs:

  • Labor – electricians, installers, paperwork
  • Permit Fees
  • Federal Tax Credit and local rebates
  • Trenching, racking and inverters

What you should insure as replacement value:

  • Solar panels
  • Labor to install or repair panels, inverters, racking
  • Clean up fees

It is important to also remember that the 30% Federal Tax Credit has been immediately taken from the value of the system once claimed, so there is no need to insure that amount. Once the FTC has been taken, it cannot be claimed if the system is resold or transferred. It is very much like buying a new vehicle with a rebate attached. Once it has been claimed, it cannot be claimed again if the vehicle is resold or transferred. At the minimum, this cost should be taken off the insured value.

For ground mount solar PV systems, you will be asked to insure the system as “outbuilding insurance”, coverage B, or other structure insurance. Though this system does require additional insurance, we look at any additional costs to be far outweighed by the benefits.   A ground mount solar PV system benefits from additional long term production from facing exactly south, having optimal tilt, and not having to be taken down for roof replacement, as most shingled roofs will need to have done at some point.

What if I have already insured my system at a higher rate?

Contact your agent and explain that the replacement value of the system is about half of what the solar array costs, including a buffer for clean up and re-installation.

Can I keep my system insured at higher rate?

Yes. Keep in mind that in case of a complete loss of the system, any wiring, trenched wiring, and salvageable components will not be covered under your insurance if they can be reused or repaired.

When should I adjust my insured value?

It would be a good idea to get a ballpark of estimated replacement value at least every five years to see if the replacement value has dropped enough to lower the insurance.

When should I tell my insurance agent that I have put solar on my building or as a ground mount?

It is a good idea to let them know before the system goes up. Typically, utilities require a liability certificate before interconnection, and this would be a great time to look at the insurable value of the system with your agent.  If it’s on an existing building, verify if there is enough insurance to cover the system without raising the cost of insurance.

What am I liable for if there is a complete loss of the system?

The insurance company deductible should be your only out of pocket cost for system repair and replacement.

By |2017-07-27T15:57:58+00:00July 27th, 2017|Categories: Frequently Asked Questions|Comments Off on Insuring Your Solar System