For a Green Home, You'll Want this Coverage

NEW YORK (MainStreet) — A new trend in homeowner's insurance policies is green coverage, which allows homeowners to rebuild a damaged home to green standards by covering the costs of environment-friendly materials and energy-efficient replacement products.

"The advantages include a possible reduction in premium if the home being insured is already considered green. These policies typically cover the higher costs associated with green building," said Samantha Reeves, senior mortgage and home buying professional with Veterans United Home Loans. "The downsides are that there may be limits on how much is covered and it's still relatively new on the market."

Not every state offers green homeowner's insurance.

"Green homeowner's insurance is a niche area," Reeves told MainStreet. "A potential homeowner interested in green homeowner's insurance should get several quotes for green and standard homeowners insurance and then make an educated decision on what policy will best meet their specific needs."

Other ways to secure lower rates include installing a safety alarm and deadbolts, installing a locking fence around swimming pools or hot tubs, replacing an old or worn roof, upgrading plumbing and electrical systems and purchasing both home and car insurance through the same company.

Those in Florida, Texas and Louisiana may want to snag as much savings as possible given that those states have the highest homeowners insurance premiums in the nation, according to the National Association of Insurance Commissioners, which pinned Florida's rate at $1,534 annually.

That's because insurers typically charge more for policies where there is a higher risk of catastrophic damage from hurricanes, tornadoes, ice, hail storms and wildfires.

"Insurance companies love safety and hate danger, so they're often willing to offer lower rates to customers with well-made homes in safe areas," said Jessi Hall, a home buying consultant for Veterans United Home Loans in Columbia, Missouri.

"Not every company is licensed to operate in each state," said Michael Barry, vice president with the Insurance Information Institute. "You should buy from a company licensed in your state because then you can rely on your state insurance department to help if there's a problem."

The standard home insurance policy doesn't typically include flood insurance or earthquake damage, and pricing of a policy can depend on square footage, the home's construction, amount of crime in the area, location of fire hydrants and whether the neighborhood has a fire department nearby.

Hall advises homeowners and potential homeowners to consult with their lender.

"Your lender will know what insurance is required for your area and property," Hall told MainStreet. "You can always choose to add greater coverage."

While homeowner's insurance covers a home in the event of weather or man-made disasters and offers protection from lawsuits where there is a third party involved, a home warranty program offers protection for major appliances, plumbing and electrical units provided that repairs meet the terms and conditions of the home service contract.

"In order for a product to be considered insurance, it must involve a transfer of risk to an insurer from a policyholder in exchange for a certain premium payment," Barry said. "Warranties are different in that they only pay out if a specific event occurs and they are not considered insurance."

--Written by Juliette Fairley for MainStreet

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