Insurance Implications For Green Construction

One of the most popular types of construction in the United States is green construction. This eco-friendly technique gained popularity because of rising energy costs, global climate change and the United States’ dependence on foreign energy providers. People all over the country are taking steps to reduce the carbon footprints their homes and business spaces leave. However, this type of construction has very important insurance implications, which all consumers should be aware of.

Buildings that are considered green have met several requirements for LEED, which is a certification formally known as Leadership in Energy and Development. LEED was developed by the U.S. Green Building Council in the late 1990s. It was designed to help building owners identify and use construction, maintenance, operations and measurable designs that are better for the environment. In comparison with standard structures, green buildings use water and energy more efficiently. They also have healthier indoor environments and produce less carbon dioxide.

Several municipalities and states have adopted special building codes that require green construction elements. Stricter water efficiency standards have been enacted in California for new residential structures. Tighter energy use standards are under consideration in New York City. Green building requirements have had a major impact on construction costs, which vary by location. Although green construction demands special procedures and materials, contractors who are up to speed with these requirements are hard to find. This means that the cost of complying with such requirements may be considerably higher than the cost of using standard methods and materials. This cost issue will also affect insurance coverage.

These factors influence insurance claims:

– What is defined as a major renovation by the code, and what percentage of the building’s area is affected.

– Whether qualified contractors are available in the area.

– Whether green building codes apply to renovations or only new construction projects.

– How new materials will work with existing components, and whether integrating them will increase the cost and time required for rebuilding.

– How the use of green materials will affect the appearance of the building.

– Delays for obtaining special materials and contractors.

– The likelihood of longer wait times for special contractors after a catastrophe happens.

– The likelihood of waiting for special building inspections and approvals after a catastrophe happens.

– How the building code applies if a natural disaster occurs.

– What standards property owners must meet following a widespread disaster.

Within the next few years, experts predict that the market for non-residential green construction will grow substantially. This means that insurance companies and property owners will have to address serious questions, and the best time to get answers is before losses occur. Commercial and standard property insurance policies offer very little coverage for ordinance or law losses. These are extra expenses incurred to comply with special requirements. However, additional coverage is available. People who own properties in areas where green building codes exist should discuss these options with an agent.

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