Everyone knows discounts reduce insurance premiums, and we’re always on the lookout for new ways to reduce our rates. Competing agents are always offering to check policies against their company’s latest discount offerings to win new business.
In addition to discounts for multiple policies with the same insurance carrier, a number of additional discounts are typically available for lower risk customers based on reliable evidence across a large population.
Lower car insurance rates for drivers with no accidents, lower life insurance rates for non-smokers and lower homeowners insurance for added safety and security features.
So what’s the logic behind Genworth, a large private mortgage insurance firm spun-off from General Electric, offering homeowners a discount for buying more energy efficient houses – at least if you currently live in Canada, but word on the street is that the discount will be available in the US soon.
How did Genworth determine the risk of loss to the mortgage lender is lower when a borrower is in a more energy efficient house?
According to reports, the policy reflects how energy efficiency operates on two related fronts.
First, the measures that make a home more energy efficient - better air sealing, more insulation and high performance appliances - are all attributes of a well-built house.
Theses attributes are proving to be more valuable when appraisals take them into account. So if a borrower gets into income trouble and can't afford the house payments, the high-efficiency house will likely sell for more than one built to lower standards.
With rising energy costs, it’s logical to think that utility bills will affect the value of a house the way gas mileage does cars today. In fact, an appraiser leading the way routinely adds $4,000 to his opinion of value when a home earns the Energy Star rating.
The second simply has to do with risk – a well-built house plus lower energy expenses mean a borrower might not get into income trouble in the first place.
By using less energy for heating, cooling and water heating, Energy Star certified homes deliver approximately 20 percent savings on annual utility bills. Plus, over the 7 to 8 years that a typical family lives in a home, they can also save thousands of dollars on maintenance costs.
Bottom line: homeowners who spend the money on improved energy efficiency should get credit for the value. On the flip side of that coin, a house with energy problems may significantly decrease in value due to a musty smell from moisture damage, excessive paint peeling on the exterior, water damage in the basement, stained insulation, higher energy bills and ice dams on the eaves or damage from ice dams (leaking roof). Energy problems can also be very serious maintenance problems.
Just another reason to consider energy efficient improvements to increase the value of your current home and, if your in the market for a new home, consider building one that’s energy efficient from the ground up.