Sustainable construction is no longer just a trend; it’s a fast-evolving reality in today’s marketplace. Green building practices, once considered niche, have gained momentum thanks to environmental awareness, updated building codes, and government incentives pushing the industry toward eco-friendly standards. But as contractors and developers embrace green construction, it’s important to consider how these changes can impact insurance needs, risks, and opportunities.
The Players and Incentives of Green Building
Green building incentives are programs and policies, often provided by federal, state, or local governments, that encourage the use of environmentally conscious materials, energy-efficient systems, and sustainable design principles. These incentives can include tax credits, grants, expedited permitting, rebates for energy-efficient upgrades, and bonus points on bids for public projects.
How Incentives Influence Materials, Methods, and Risks
When contractors pursue green incentives, they often integrate new technologies and materials, such as solar panels, high-performance insulation, low-VOC products, or even innovative water management systems. While these choices can enhance a project’s value and appeal, they may also introduce new or unfamiliar risks for both the builder and the property owner.
5 Critical Areas Impacted by Sustainable Construction
Green construction introduces unique insurance challenges and opportunities that contractors and owners can’t afford to overlook, such as:
Tailored Coverage for Green Projects
Green buildings sometimes require custom insurance policies to cover specialized materials, renewable energy systems, or unique construction methods. Standard property policies may not automatically account for these upgrades.
Reassessing Property Values and Replacement Costs
Features for green buildings often add substantial value to a property. To protect these investments, contractors and owners need insurance coverage that fully accounts for the higher replacement costs of sustainable materials and systems.
Managing Performance Guarantees and Liability
Some incentives require certification, such as Leadership in Energy and Environmental Design (LEED), or the fulfillment of specific performance standards. Failing to meet these guarantees can increase liability exposure, making professional liability or errors and omissions coverage essential.
Premium Savings for Green Builds:
Because green buildings are often safer, more resilient, and less prone to losses due to advanced design and technology, insurers may offer premium discounts or favorable terms for certified sustainable projects.
Keeping Pace With Evolving Legislation
As legislation continues to evolve, contractors need to stay up to date with changing codes and standards. Staying compliant can affect the availability and cost of insurance coverage.
3 Actions to Keep Your Green Builds Covered and Compliant
Collaborate Early
Work with your insurance advisor during project planning to understand potential coverage needs and any available premium reductions.
Document Everything
Keep thorough records of green certifications, incentives applied for, and materials used. Doing this helps during claims and compliance checks.
Review Annually
Regularly assess your insurance portfolio to ensure it reflects the actual value and unique characteristics of green projects.
Strategic Solutions for Green Construction Success
As green building incentives continue to expand, contractors who stay informed about both opportunities and insurance implications can position themselves for success. CBIZ works with construction firms of all sizes to help navigate these changes, manage risk, and capture the full value of sustainable building.
Contact CBIZ for a custom risk assessment and coverage review.
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