Tags: solar | panels | damage | insurance

If Solar Panels Are Required, Who Is Responsible for Any Damages?

If Solar Panels Are Required, Who Is Responsible for Any Damages?
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Friday, 18 May 2018 02:39 PM Current | Bio | Archive

Many states are seeing a large increase in the number of homeowners opting for solar panels.

Much of that movement is due to how much more affordable solar panels have become.

Alongside that affordability, solar panels are more efficient than they’ve ever been, making them a good option for consumers looking to save money on electricity.

Yet getting solar panels installed on your home has always been optional. At least, that was the case until just recently. California’s Environmental Commission (CEC) passed a mandate making solar panels on new homes a requirement starting in 2020. Those in favor of the mandate point out the huge environmental benefits this move will bring, but others raise some important concerns regarding the move.

Chiefly, if solar panels are now mandated, who is responsible for covering potential damages? Additionally, while solar panels are much cheaper than they used to be, but still comparatively expensive, what impact might this mandate have on the cost of buying a home, and on the cost of homeowners insurance for new homebuyers?

Impact of Solar Panels on the Cost of Homeownership

According to an analysis from the CEC, the new requirement will add $8,000 to $10,000 to the upfront purchase price of a new home. The CEC states that this cost will be made up in energy savings over the lifetime of the home’s ownership (about $40 to $80 per month in electricity bill reductions). The estimates vary depending on climate zone, with lifetime savings ranging from around $16,000 to over $30,000. However, some note that the CEC did not run its projections past any economist or environmental experts, so the efficacy of the the numbers are still in doubt.

On the cost angle, the CEC’s numbers may be low. Average installation costs for panels may range from around $10,000 for a 5 kW system to over $21,000 for a 10 kW system.

And it appears the cost estimates may not take into effect the fact that typical buyers only stay in their homes for 13 years, which is far from a lifetime. A family that spends a dozen or so years in their new home could see the costs recouped with the high cost-saving estimate from the CEC, but that family won’t see those savings if their monthly savings are on the low side of that estimate. This is especially true if their home is using a higher—and more expensive to install—kilowatt panel.

The CEC does include a lifecycle estimate in its analysis that accounts for the cost of replacing panels and converters. However, the CEC puts a 30-year lifespan on the panels, while many estimates put the lifecycle of new solar panels at 25 years. While they can still generate electricity for decades beyond that, they become increasingly less effective and ultimately need to be replaced with newer, more efficient panels. By the end of their life, solar panels are noticeably less-efficient and the cost saving in electricity goes down.

Also of concern is the impact that solar panels have on homeowners insurance rates. A search of the CEC analysis shows that word “insurance” never appears, indicating that the CEC either never took this issue into account or believed it to be inconsequential to the analysis.

Positively, rooftop solar panels are typically covered by a homeowners insurance policy. However, as rooftop solar panels are considered part of the home’s structure, homebuyers need to take that factor into account when considering how much insurance coverage to purchase for their homes. And as the panels can add tens of thousands of dollars more to the value of the home, they will add to the cost of purchasing dwelling coverage for homeowners insurance.

That said, not all insurers are consistent regarding whether homeowners insurance should provide coverage. Some insurance companies will require you to purchase an add-on policy just for the panels. And while you may have coverage if you own the panels, if the panels are leased instead of owned, you are technically not the owner, and the panels may not be covered under your insurance policy.

California’s move to mandate solar panels may be environmentally friendly, but it’s important to watch regarding the impact on consumers and homeowners, especially as it relates to the external and potentially unforeseen costs associated with adding pricey structures to a home.

Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.

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MaximeRieman
California’s move to mandate solar panels may be environmentally friendly, but it’s important to watch regarding the impact on consumers and homeowners, especially as it relates to the external and potentially unforeseen costs associated with adding pricey structures to a home.
solar, panels, damage, insurance
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2018-39-18
Friday, 18 May 2018 02:39 PM
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