Does My Solar System Need Insurance?

Insurance is often overlooked when decisions about solar are being made. When you implement solar at your site there are a couple of implications relating to insurance: 

1. Insurance Coverage: Your building insurer will want assurance that you are installing a compliant system on the roof of the building, and that it's not going to damage the building in any way.
2. Insurance Pricing: If you purchase the solar system, it will need to be insured, as part of the building insurance, in case it is damaged or destroyed, such as in a hailstorm. (If you contract the solar system through a PPA, it is typically insured by the PPA financier.)

In this blog we explore these considerations further, from a commercial or industrial building.

Insurance Coverage

• In the case of property owners, as a fixed, permanent, structural improvement to a building, or –
• In the case of tenants, as a property alteration or addition for use in your business and where the cost of reinstatement is your responsibility.

We would recommend that when the system is being installed, who owns and is responsible for the system is properly considered and the relevant insurer (for either for the property owner or tenant) is informed.

Some commercial insurance policies may make allowance for automatic inclusion of coverage for additional property such as a roof mounted solar system where the installation occurs part way through the insurance period

We would recommend that it is prudent to inform the relevant insurers of the additional solar system installation as they may view this as a material change to the risk they are insuring

It is possible that insurers may seek to impose changes in coverage or require additional premium (refer below) depending on the scale of system being installed.  For example, a change in coverage may be a different / higher excess applicable for claims involving damage to the solar system arising from events such as hail / storm.

Engaging the building insurers early and providing comprehensive information to is important to achieving the best outcome in respect to coverage and pricing – We recommend that the below information is provided to insurers when planning to implement the new solar system:

• Completion of a structural roof assessment and structural certificate of compliance for the proposed solar system. 
• Type of system being installed (overall cost and scope of work, panel make/model and specification as well as specification of other components)
• Location of all system components on existing facility
• Solar Retailer insurances such as appropriate Public and Products Liability, Contract Works and Workers Compensation insurances. (Note: All Solar Retailers on Beam Solar must provide these and keep them up to date to participate in projects).
• Planned ongoing system maintenance

Insurance Pricing

Depending on the scale of system being installed insurers may wish to adjust the premium on your policy making allowance for the additional risk of insuring the system. Some insurers may do this at the time of the inclusion within coverage whilst others may be happy to await the renewal of the policy. 

Largely this will depend upon the scale of the system in the context of the other assets being insured under the policy at the time.  For example, for a building valued at / insured for $5,000,000 (replacement value) a $200,000 roof mounted solar system may be considered differently to a building valued at / insured for $1,000,000 (replacement value). Proportionately the solar system makes up significantly different amounts in each scenario. Its more likely an insurer may choose to charge an adjustment premium in the latter case.   

It is difficult to exactly predict any variance in cost of insurance based on the installation of a solar system.  As a guide for budget purposes, consider the level of increase in asset values insured that the installed system brings and apply this percentage to your current premium. For example:

NB – these are used for examples only and pricing could vary due to other factors associated with the building location, occupancy and solar system type

How do I reduce these costs?

Unlike your building, the replacement value of your solar system will decrease over time as technology improves and the cost of solar decreases over time. Your insurer will likely continue to insure your solar system at the original installation cost, or higher, unless you advise them otherwise. Through Beam Solar's Manage service, we provide annual System Replacement Cost values to provide to your building insurer to ensure appropriate sums insured are used for insurance purposes. 

This article was co-written by our friends at Barrack Broking: Trusted Insurance Broker & Risk Management. If you’d like support in reviewing the insurance aspects of your investment in solar then please reach out to Graeme Hay, Director, at ghay@barrack.com.au