Insurance Considerations for Going Green

More and more small businesses are going green for ethical reasons. They want to protect the environment by reducing their use of paper and water and even curb their emissions. But there are insurance considerations (and costs) involved.

Over the long term, many small businesses that are moving to more sustainable practices save money (for example, by lowering their electricity and water bills). In the short term, however, setting up sustainable business practices can be costly.

For example, replacing outdated or damaged equipment with more environmentally friendly equipment is typically not fully covered under commercial insurance policies. Any reimbursement available is generally based on the value of the original equipment, and that value is usually less than the equipment’s greener counterpart.

If you are looking to go green when replacing equipment, there are some ways to save money. Insurers also want to be mindful of sustainable practices, and in keeping with that, many now offer green equipment and materials endorsements that small businesses can add to their commercial property insurance policies.

What is a green endorsement? It is an addition to an insurance policy. It specifies that when your property is damaged and needs replacing, there will be coverage for the higher cost of environmentally friendly materials and equipment. In other words, it covers the gap between the original cost of your old equipment and the cost of your new environmentally friendly equipment.

Green endorsements do not just apply to materials and equipment. If your building is damaged by a disaster (such as a flood, hurricane, tornado, fire or earthquake), the endorsement may also allow you to elevate your building to green certification status when it is repaired or rebuilt. The green endorsement will typically cover all costs involved in sustainable construction. These might include design, engineering, certification and recycling of old materials.

Green endorsements may also apply to vehicles. Do you have insurance coverage on a delivery truck and want to replace it with an electric or hybrid car if it is damaged or stolen? If so, you might be able to get a green endorsement on your auto policy.

What are the costs of a green endorsement? It varies from insurer to insurer and policy to policy. For example, some policies may require small businesses to increase their coverage. Because green construction typically takes longer than traditional construction, if you are rebuilding in a sustainable fashion, you may want to extend your business interruption coverage.

Additionally, once you have gone green, you may want to increase your coverage in general to cover the added cost of replacing your green materials, equipment or building’s cost.

In summary, increasing numbers of small businesses are trying to reduce their carbon footprint, and your business can go green by planning for replacement property to be more sustainable, but it comes with a cost.

We’d be happy to review your business insurance needs and determine if you are adequately covered for going green. Please call or email us today to get your insurance checkup going.