Solar panels and their impact on home insurance

By: H.G. Watson on July 6, 2023

With interest rates on the rise, many homeowners are looking to save money wherever they can. One way to do that is by finding ways to reduce energy costs.

Solar panels are one way that you can theoretically save money while also cutting down your fossil fuel emissions. Once installed, a majority of your home is powered by natural, renewable energy.

But despite the best intentions, some homeowners can hit snags trying to instal roof-mounted solar panels. Issues can range from improperly installing the panels, causing leakages and other problems, or finding out that a roof is too old and damaged to support the panels. In Florida, some customers were dropped by their insurance companies who claimed that solar panels were too much of a liability risk.

While Canadian insurance companies are a little more accommodating than their U.S. counterparts when it comes to solar panels, there are some things a homeowner should take into consideration before going off-grid.

What are solar panels?

Essentially, solar panels are a series of cells that absorb energy from the sun and convert it into electricity. (If you do want to geek out over the science, here’s a nice breakdown from the University of Calgary.)

While solar panels can be mounted on racks close to the ground, most homeowners opt for their roof. In Canada, solar panels will capture the full potential of available sunshine when tilted at a 20- to 45-degree angle towards the south.

Solar panels have become steadily more popular in Canada, with sales growing year-over-year. Just like with other climate-adaptive innovations like electric vehicle ownership, governments at the federal, provincial and municipal levels offer grants, loans and tax incentives to homeowners for installing them. For example, all Canadians can access the Canada Greener Homes Grant, which provides up to $5,000 to make your home more energy efficient.

How can solar panels help me save on energy costs?

Utility costs vary for Canadians and depend on the size of the home, whether it relies on natural gas or electricity, how well insulated the walls are, and, crucially, location. However, it’s safe to say that solar energy will reduce energy costs compared to fossil-fuels-derived power and, moreover, will continue to widen the savings gap over time.

A report from Clean Energy Canada found that not only is solar and wind power less than, or at par with, natural gas and electricity — even before carbon taxing and government incentives — the prices will continue to decrease as much as 40% by 2035. That's due to more sophisticated energy storage solutions and the overall declining cost of solar power projects. Simply put: It is expensive to build and operate gas plants in provinces such as Alberta and Ontario; much more expensive that it is to build a wind farm or to put up solar panels. And unlike fossil fuels from the ground, there is an endless supply of both wind and sun.

If this all sounds tempting to you, you’ll need to consider some of the cost variables: How much power you actually require in relation to the high upfront costs of installing the panels, and how much sun your home gets. Some areas of the country get less sunlight than others, and if you live in a shady area, you may not get enough power generation. (However, solar panels can charge even on cloudy days — just less effectively.)

Will my insurance company cover my solar panels?

Roof-mounted solar panels are likely covered under most home insurance policies as they’re directly attached to the house. Ground-mounted solar panels and panels that are attached to a structure on your property may also be covered under your home insurance, depending on your policy. “There are a number of home insurance providers out there who can do it,” says Stefan Tirschler, Director of Product and Underwriting for Square One Insurance. (Including Square One.)

Should I notify my insurance company that I am installing solar panels?

While most home insurance policies can cover solar panels, they pose unique risks and characteristics. Just like any other major renovation or change you make to your home, Tirschler recommends that you talk to your insurance provider or read your policy before installing solar panels.

“Since solar panels are the exception right now, rather than the rule, your home insurance provider will not have assumed that you have solar panels on the roof,” he says. “So, the amount of insurance that you're currently carrying won't be enough to include those solar panels if you had to rebuild the entire home.”

He also recommends ensuring that before even considering the installation, you make sure the frame of your home can support the added weight of solar panels on the roof. “A professional [solar panel] provider will take care of the necessary permitting if there's any engineering studies that might have to be undertaken to make sure that your roof is strong enough or in good enough condition,” Tirschler says.

Will solar panels increase my premiums?

In short, yes. Solar panels can cost between $10,000 and $20,000, and they add value to your home.

“Say someone is increasing their limit of building coverage by 10% because the solar panels increase that cost of rebuilding by 10%,” says Tirschler. “You would expect a roughly proportional change in the amount of premium that you're paying as well.”

However, your solar panels will be covered as part of the structure of the house. That means if they are struck by lightning, or a tree falls on your roof, you can make a claim to cover the cost of replacing the panels.

If you are planning on upgrading or replacing your roof yourself in order to accommodate solar panels, you may be reducing potential claims for roof damage down the road, which could also help ease your premiums.

Are there options other than solar panels to decrease my energy costs?

If solar panels don’t work for you because of cost, poor light conditions, or the state of your roof, there are other things you can do to save on energy costs.

One simple and easy change you can make to keep your home cool in the summer and lower your energy bill is by converting your roof to a cool roof — simply by painting it white, or replacing your shingles with a lighter material, you can reflect the sun’s rays, keeping the inside of your home nice and cool.

Feeling more ambitious? Try covering your roof with vegetation. A green roof helps keep your home cool and lower energy costs. Some municipalities offer rebates and tax incentives for homeowners who decide to install cool or green roofs.

If you’re set on solar, you can lease panels and pay a monthly amount to the solar panel company. You’ll save on the upfront cost of installation and the cost of purchasing them outright. (In this case, you should still let your insurance company know you are making the change — if it adds value to your home, or, in the case of leased solar panels, is a possession that may need to be covered, you may need to adjust your premium.)