Green insurance, the eco-alternative

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Insurance innovations aren’t usually glamorous or trendy. But recently, a handful of major insurance companies have “gone green,” at least in their product offerings.

Those who own hybrid vehicles or green-certified homes can benefit from lower premiums on their property. And those who aspire to own a greener home can choose coverage that, in the event of a loss, will pay for rebuilding their home greener than it was before.

The question is: Does earth-conscious coverage make sense for you?

Ashley Katz, spokeswoman for the Washington, D.C.-based U.S. Green Building Council, contends that green insurance is money well spent. The organization is made up of companies, contractors and government agencies that promote sustainable building practices.

“Investing in green strategies is a smart strategy for ensuring that your home performs well, saves money and is better for the health and well-being of the home’s occupants,” Katz says.

Greening your insurance
  1. Eco-policies for homeowners
  2. Go green the next time around
  3. Greener auto policies

Eco-policies for homeowners

There are two types of green policies for homeowners. One covers buildings that already meet stringent efficiency and sustainability standards. The other offers the option to replace any losses incurred on the property with more environmentally sensitive materials.

Fireman’s Fund Insurance Co. of Novato, Calif., was one of the first companies to introduce homeowners policies that feed into consumer desire to make homes more energy-efficient and environmentally sustainable.

For people who already own LEED-certified homes, Fireman’s offers a 5-percent discount off regular annual insurance premiums. LEED, which is short for the Leadership in Energy and Environmental Design Green Building Rating System, was developed by the U.S. Green Building Council and is a recognized environmental standard in the building world.

While there are “green” homes that have not gone through the LEED certification process, using this standard allows Fireman’s Fund to have a common benchmark for deciding what homes qualify for the green-property discount, says Janet Ruiz, spokeswoman for Fireman’s Fund.

While this discount is certainly popular with the small customer segment that owns LEED-certified residential buildings, it doesn’t apply to most people searching for homeowners policies.

Go green the next time around

For people who don’t own green-certified properties, several insurers are introducing an option that allows homeowners to replace any property losses with more eco-friendly options. Farmers Insurance of Los Angeles recently introduced an option it calls “Eco-Rebuild” that will replace damaged properties with more environmentally conscious materials. This option is available as an addition — or endorsement in insurance lingo — to a regular homeowner’s policy for $25 or 2 percent of the annual premium, whichever is more.

“There’s a continuing trend for individuals to think and act green,” says Jeff Reinig, Farmers Insurance senior vice president of home product management. “The Eco-Rebuild endorsement addresses this trend.”

Reinig says by this summer, this option should be available to Farmers’ customers in 28 states.

Fireman’s Fund also offers its “Green Upgrade,” which pays for a greener rebuild after a loss, as an addition to the regular homeowners policy. It’s available as an addition to a regular homeowner’s policy, starting at $25 annually for homes with an insured value of $350,000 or less. For houses with higher insured values, the annual additional cost is $70 per $1 million of the home’s value.

So what does a policy mean when it offers to rebuild a home greener than before?

Reinig explains that in the event of a covered loss, the Eco-Rebuild endorsement means Farmers will pay extra to replace your old kilowatt-hungry appliances with Energy-Star devices and recycle debris rather than send destroyed materials straight to a landfill. The Energy-Star label means the appliances meet an energy-savings rating created by a joint program of the U.S. Environmental Protection Agency and the Department of Energy.

Greener auto policies

For owners of hybrid vehicles, saving the Earth and saving money are sometimes as high a priority as saving on gasoline. For these consumers, a handful of companies are offering discounts that make it a sound option for drivers to own these fuel-sipping vehicles.

“Offering these environmentally friendly policies fits with our corporate philosophy as well as a lot of our customers’ personal philosophies,” says William Pearse, vice president of auto product strategy and design for Traveler’s Insurance of Hartford, Conn., which was one of the first companies to offer discounted insurance rates for hybrid autos. The company also has introduced a discount insurance program for hybrid or electric boats.

Even so, most insurance companies charge higher premiums for hybrid vehicles because of the cost associated with replacing expensive components like the nickel-metal-hydride batteries that provide some of the power for hybrids, Pearse says.

An unanticipated effect has been that Travelers has seen a lower incidence of losses from owners of hybrid vehicles. “They’re exhibiting a responsibility by owning a hybrid, and that seems to cross over into more responsible driving habits,” he says.

Farmers also offers a discount for hybrid drivers of up to 10 percent of the policy’s annual cost. Brian Dwyer, senior vice president of auto product management for Farmers Insurance Group, says the company has found that drivers of hybrid vehicles tend to be more mature, more environmentally conscious and drive fewer miles than other motorists. Because they cause fewer accidents, the cost of replacing the expensive hybrid parts is more than balanced out by their “preferred” status as insured.

The bottom line with green auto insurance is fairly straightforward: Finding a company that offers discounts for hybrids is a good move for owners of these eco-smart cars. Regardless of whether your hybrid is an economical Prius or a luxury hybrid Lexus RX, Farmers and Travelers offer a discount of up to 10 percent off a normal policy, depending on individual insurance histories and state regulations.

If you’re hoping to score a greener insurance policy for your home, vehicle or even your boat, call your current insurer and ask if any discounts are available. And as you should do anyway, shop around and see who gives you the most bang for your insurance buck. Howard Mills, chief adviser for the insurance group at Deloitte & Touche USA LLP, says insurers are increasing their offerings of climate-change-related products, including incentives for customers who have, or want to have, greener homes and vehicles.

“My sense is that the insurance industry feels this isn’t going to be a fad,” Mills says. “This isn’t something that’s going away in a couple of years. It’s driven in demographics with younger consumers who will be purchasing insurance products for years to come.”