Sustainability in Insurance: Green Policies for a Greener PlanetIs your business dedicated to sustainable practices? Green policies may help you achieve your goals. Although insurance for environmentally-friendly practices is often overlooked, there are coverage options that support sustainability.
Why Should Businesses Go Green?
If your business is already committed to sustainable business practices, you’re probably aware of the many benefits of going green. Let’s take a look at a quick summary of the benefits.
First of all, sustainable practices make business sense. Sustainable practices often result in reduced waste and energy usage, which leads to major cost savings. As an example of what’s possible, the Center for Sustainable Energy says a Walmart Supercenter in Covina, California, reduced its electricity use by 32% through a retrofitting project.
In addition to the direct benefits and cost savings gained from reducing energy consumption and waste, businesses often improve their reputation and appeal to consumers by adopting green practices. According to PwC, 80% of consumers say they are willing to pay more for sustainable products. On average, consumers will pay 9.7% more for goods that are locally sourced, made from recycled or eco-friendly materials, produced in a supply chain with a low carbon footprint, or meet other environmental criteria.
On top of these purely business reasons, there are ethical reasons to embrace green practices. According to the National Oceanic and Atmospheric Administration (NOAA), we are already feeling the impacts of human-induced climate change. The climate changing is resulting in higher temperatures, rising sea levels, increased drought, and more flooding. Everyone in society – including business leaders and investors – have a stake in the climate.
How Do Green Policies Work?
Green insurance policies are not a specific type of insurance product. Rather, the term applies to any insurance policy that includes terms that support sustainability. These terms often take the form of green discounts or endorsements.
Green Discounts
Some insurance companies provide insurance discounts as green incentives. For example, the Insurance Information Institute says some insurance companies offer hybrid vehicle premium discounts and alternative fuel premium discounts, while some homeowners insurance companies offer premium discounts for Leadership in Energy and Environmental Design (LEED)-certified homes.
These insurance discounts are common in personal insurance policies. In addition, some commercial insurance providers offer insurance premium incentives for sustainable practices. Ask your broker or insurance carrier about your options.
Green Endorsements
If you need to repair a building after a loss or replace a piece of equipment, insurance that provides replacement cost value coverage will typically only cover the cost necessary to repair or replace the lost property with materials of similar quality. This is superior to insurance that covers actual cash value, as this only pays a benefit for the current value. Depreciation means this is often not enough to cover the full cost to replace the lost property.
Even replacement cost value coverage has its limitations, though. As technology progresses and new building codes come into effect, the materials and equipment you used in the past may no longer be adequate. Ordinance or law endorsements address this issue insofar as building codes are concerned, by providing coverage to bring a building up to modern codes when repairs are necessary. Similar endorsements provide coverage to help businesses adopt greener options when repairs are necessary.
According to the Insurance Information Institute, businesses can add a green endorsement for materials and equipment to a commercial property insurance policy. This will provide coverage for the higher cost of environmentally-certified materials and equipment even when the original property or equipment was not green certified. Green endorsements for construction and related costs cover the higher costs associated with green design and engineering, recycling, and certification fees.
Imagine a storm destroys your building’s roof. You want to replace it with a sustainable option that has a smaller carbon footprint and will conserve energy. However, your old roof was not sustainable, and your insurance does not cover the upgrade. Now, you have to choose between a non-sustainable roof that is not in line with your company’s values or covering the costs out of pocket. A green endorsement prevents dilemmas like this.
Are You Interested in Green Policies?
Some green insurance policies may already be available to your business. Plus, new green policy options may emerge as insurers look for new ways to incentivize sustainable practices. To explore your options, reach out to Heffernan Insurance Brokers.
