October 19, 2012

The Green Builders Guide to Insurance

Unlike traditional energy source specialists, like electricians, natural gas professionals, and plumbers, there are few people in the green industry with a great deal of experience. Every home and business owner takes a risk when embracing green technology and hiring someone without a lot of experience to install solar or wind systems. Builders who specialize in green technology run some special risks when designing, assembling, and installing green systems that are not encountered in traditional building projects. Some of the most important aspects of insuring a green building project are discussed below.

During the Building Effort

Standard builder insurance will not cover some of the specific situations that can occur during a green building project. Since experience is lacking within the green building industry, care must be taken to carry sufficient coverage for each of the following possibilities.

  • Design Mistakes – While designers strive to be innovative and efficient in their green building designs, there are instances where the designed systems will not deliver the results necessary to run building systems. Green systems must be compatible with standard and green appliances so the design specifications must be complete for all components. If the design proves to be unworkable, the cost of starting over can be covered with the right kind of green building insurance coverage.
  • System Alignment – If the installer follows the design perfectly and assembles the systems according to all of the specifications, the HVAC, electrical and plumbing systems should work within the design specifications for the anticipated levels of energy savings. When the commissioning engineer evaluates the systems and finds major deficiencies in the energy output, the cost of the changes to the system must be absorbed somewhere within the project unless sufficient insurance coverage has been purchased.
  • Updates to Existing Systems – When existing green energy systems must be enhanced to generate more energy for expanding needs, chances are that some component will be damaged during the project. When these mistakes happen within a standard build, the components are replaced and work continues. For a green project, a cascade of system failures can be caused by installing the wrong component. When major losses occur, either the builder will have to pay for the losses or the insurance company will cover the loss.
  • LEED Certification – Once all the systems are installed and the commissioning engineer arrives, there is always a change that the system will not be approved for LEED certification. The cost of making the necessary changes can be exorbitant if the designer or installer were not experienced enough to handle the project. The cost of updating the system to bring it into LEED compliance can be covered by certain types of green building insurance.

After Completion

One of the most important roles of the builder of a green project is to educated the homeowner or business owner with the information necessary to have their building, business, and home insurance policies updated with appropriate coverage. While there are certainly many different business insurance companies to choose from it is imiportant to note that standard coverage will not pay for the additional expense incurred by loss of a green energy system.

  1. Owner Understanding – Every homeowner or business owner wishing to generate green energy must understand the need to purchase more insurance to cover the systems that cost much more to repair and replace than conventional energy systems.
  2. Additional Coverage for Loss – Replacement insurance limits must be increased on the insurance policies to cover the expensive components that make up the green energy systems. Damage to standard appliances must also be covered to prevent loss.
  3. Mishaps and Malfunctions – When the green energy system does not sustain a consistent energy current, components can burn out because of the power bursts or lulls that cause circuit boards and motors to absorb excess energy. Very expensive equipment must be insured against these possibilities.

Replacement after Loss

Natural disasters occur where green buildings currently exist and the cost of replacing systems after tornadoes or hurricanes can add substantial cost to rebuilding projects. Experienced green builders will work with owners to update the damaged green energy-producing systems with more efficient models. Expense of upgrading the systems must be covered by the insurance.

  • Component Replacement – Damaged components must be replaced, but other undamaged components may require replacement to make the system LEED compliant once again.
  • Cost of Traditional Energy – While the system is being repaired, power must be purchased from a utility company to sustain other business operations and power the construction equipment. Insurance policies exist that will reimburse the owner for the cost of the energy purchased while the green energy system is being repaired.
  • Removal of Debris – Solar and wind components require special disposal and these additional costs can be covered by the right insurance policy.
  • Extended Replacement Period – Green energy systems require longer replacement periods and the increased cost of repairs must be covered by the insurance policy.

Careful Planning

Only a couple of insurance companies have designed highly specialized insurance policies to cover the multi-dimensional green energy project. Experienced builders can discuss their coverage for the building project and answer questions for home and business owners in search of green energy solutions. Care must be taken to mitigate loss from the many ways a green energy project will come in contact with traditional appliances and systems.

About the Author: Shawna enjoys researching and writing about green technology and tips for saving money on insurance. She contributes for a website to compare insurance providers and a website with a guide to electric car insurance. Shawna is a voracious reader and when she is not writing she is most likely reading.

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