Are Green Homes in Arizona More Expensive to Insure?

With climate change making winters shorter and summers hotter all over the world, many Arizonians are trying to make a shift toward becoming more environmentally conscious. Movements such as “Naturehood” and “Agrihood” are springing up in towns and cities across Arizona.

These movements focus on creating connected, vibrant, environmentally conscious communities, with an eye toward building (and granting access to) more green spaces. Agrihood in particular focuses on a “farm-to-table” lifestyle that’s more connected and sustainable than giant corporate models.

Part of this growing trend toward eco-friendly living is the rise in popularity of green homes. But many prospective homeowners are left wondering if green homes cost more to build, sustain, and insure than regular homes — and this could hold back more widespread adoption of green homes.

 

What Constitutes a Green Home in Arizona?

So what exactly is a “green home”?

In general, a green home refers to a structure that’s energy-efficient, with little or no carbon footprint, and is made of sustainable materials. Other common features of a green home are energy-efficient appliances, solar panels, low-flow drainage, and more — all with an eye toward having minimal impact on the environment. Because of the materials used in their construction, green homes tend to have lower energy bills.

A great deal of work and consideration goes into the construction of a green home. For instance, they’re usually built with a heavy emphasis on natural light, to reduce the need for electric lighting as much as possible. As mentioned, they also rely on natural energy sources such as wind and solar to provide power. Green homes are often built as close to necessary amenities as possible, to reduce the need for vehicle transportation. The materials chosen for construction are carefully considered for maximum sustainability and minimum harm done to the environment — preferably locally sourced, made with renewable energy, and perhaps even repurposed.

Does Insuring Green Homes Cost More?

You might expect a green home to cost more to build than a more conventional home, and in some cases, you’d be right — green homes tend to add anywhere from 4 to 11 percent to construction costs — although the difference could be made up over time with the money saved from lower energy bills and sustainable, efficient construction. But does a green home cost more to insure?

The answer is: it depends. First, it depends on your definition of “green.” Having sustainable materials and renewable energy doesn’t automatically qualify your home as green. The home must meet the requirements set by the Leadership in Energy and Environmental Design (LEED) Green Building Rating System. If it does meet those requirements, your insurance might actually be lower, depending on the carrier.

But there’s no guarantee of lower home insurance rates even if your house qualifies. The trend of green homes is still new and growing, and many insurers are still unsure how to properly assess the risks. The relative novelty of green homes means there’s not as much historical data to fall back on when assessing risk, which may lead carriers to opt for higher premiums just to cover any claims. Fortunately for Arizona residents, the state has fared better than most in terms of adopting more forward-thinking insurance policies. But many insurers are reluctant or even unwilling to provide coverage for a green home — meaning that dream home with all the eco-friendly features you’re hoping for might be uninsurable — a recipe for financial disaster.

 

The Good News About Homeowners Insurance in Arizona

The average home insurance premium is about $1,280 a year, or $107 a month. (Source: The Zebra’s Ross Martin.) Insuring a green home may end up costing significantly more than that to insure — although it depends on the state, since every state has different requirements for “green” qualifications. As mentioned above, having a LEED-certified green home can lower your payments by as much as 5%.

Additionally, some insurance companies offer additional insurance that, for around $70 / year per $1 million insured, will allow you to rebuild your home with sustainable materials should there be a need for significant rebuilding. The hope behind these policies is that it will make green construction more common, leading to more widespread adoption of sustainable materials. This will, in turn, make it easier for insurers to make accurate predictions about the cost of rebuilding with green materials, and hopefully bring insurance premiums down for owners of green homes.

This means there’s no clear, catch-all answer to whether your green home will cost more to insure. Region-specific requirements and insurance carriers vary. You may have to do some shopping around to find the best Arizona home insurance for eco-friendly construction. The payoffs, however, are considerable — not only will you be doing your part to help slow the progress of climate change, but you’ll also have a cheaper, cleaner, more efficient home to live in.