Solar panels are becoming an increasingly common add-on to homes and other buildings. In fact, Google says searches for the alternative energy source have grown 50% year over year. But what are they exactly, how do they work and what are the benefits of solar panels for your home and family?

Read on to learn more about solar panels, the pros and cons of installation and how solar power affects your homeowner’s insurance policy.

What is Solar Energy?

Simply put, solar energy (or solar power) uses devices to convert light from the sun into useable energy for your home and other items. These days, when we think of solar energy our minds go straight to the large solar panels many homeowners have installed on their roofs – but did you know solar technology has been in the works for over 100 years?

It’s true! Over time, solar energy has evolved from equipment used to power steam engines to the calculators we use in classrooms, and now in solar panels that help people around the world save energy, reduce their expenses and rely less heavily on traditional power sources.

Here’s a closer look at the benefits of solar panels:

Benefits of Solar Panels

Making the switch to solar energy has many benefits for you, your home and the environment, including:

Energy Savings

Data from the U.S. Energy Information Administration shows that residential solar panels can produce as much as 850 kilowatt-hours (kWh) of energy — up to 95% of what the average household uses monthly. For many homeowners, adding solar panels is a great way to save energy and reduce your carbon footprint, helping to create a healthier planet and cleaner atmosphere.

Cost Savings

With all those potential energy savings, it’s no wonder solar panels have developed a reputation as an effective cost-savings tool for many households. In fact, according to Greenlancer the average family can save $1,500 a year by adding solar panels to their homes. And the savings don’t end there – adding solar energy adds value to your home, helping you build equity. Plus, you can claim a tax credit for solar panels to help reduce the upfront costs of installation.

Tax Credit for Solar Panels

While the upfront solar panel cost can be a turn off for many families, there are often tax credits to help offset some of the costs. In fact, the Inflation Reduction Act will extend a 30% tax credit for rooftop solar through 2032. In some cases, your state may even offer its own incentive for investing in solar energy. Talk to your local officials to ensure you’re taking advantage of all the savings available to you.

Increased Home Value

Recent research conducted by Zillow shows that adding solar panels can increase your home’s value up to 4.1%. Making upgrades to your home helps add value and, in turn, build your home’s equity. While adding to your home’s value and equity is great, it’s important to remember that it also means you’ll need to make changes to your homeowners insurance policy.

How Do Solar Panels Work?

There are two types of solar technology, but the one you’ll be most familiar with is photovoltaic technology (PV) – the solar panels commonly seen on residences or small businesses. PV solar panels are made up of individual cells that, when placed in the sun, absorb photons from sunlight, create an electric field across the panel and become a reliable alternative energy source for you.

Concentrating solar-thermal power, on the other hand, uses mirrors to reflect sunlight and direct it on to receivers. The receivers collect the energy and convert it to heat, which can then be used as electricity. This type of solar energy is more common for large businesses and power plants.

While solar panels are effective in nearly every climate, some homes are not built to support solar energy systems. When researching solar energy, you’ll need to take the following factors into account:

• The size, shape and slope of your roof, which can make it or break it when fitting your home for the appropriate number of panels
• The age of your roof, which should be less than 10 years old when you begin solar panel installation to ensure you get the most life out of your setup
• Tree coverage on your property, which can block light from reaching your solar panels

When you contact a solar energy company, they will send a team of professionals out to determine if your home is right for solar panels, break down everything you’ll need to get started, and walk you through the process.

Does Home Insurance Cover Solar Panels?

When it comes to solar panels and home insurance, there’s a lot to consider. In most cases, solar panel insurance coverage is included in your homeowners insurance policy. If you have older solar panels that have not yet been upgraded, an independent insurance agent can help you understand what is covered and what is not. For example, if you have an older system without an exterior shut off valve you could be declined by an insurance company.

While you likely won’t need to seek out an additional policy to cover your solar energy system, you will want to ensure your homeowners policy is updated to include any changes to your home’s value. Skipping this step can be bad news in the event of a loss. Without the proper protection in place, you could be left to pay expensive out-of-pocket costs to repair or replace home damages, especially in the event of a total loss.

Do Solar Panels Increase Home Insurance?

You might see a rise in your home insurance costs after adding solar panels. While the panels themselves are included in your policy, you’ll need to increase coverage amounts to reflect the new addition to your home and any increased value it brings. If that happens, it does mean a rise in your premium.

However, that small increase is well worth it when you consider the amount you’ll save should the unexpected happen.

What Insurance Companies Cover Solar Panels?

Because solar panels are covered by most homeowners insurance policies, you should be able to work with any major insurance carrier. If, for some reason, you can’t or don’t want to continue with your current provider, talk to an independent agent about your options.

y Matt Knepper, Director, Channel Operations, Main Street America Insurance