The heat pump trap that could invalidate your insurance

Homeowners are under pressure to dramatically cut their household emissions – but not only can the energy-saving changes cost thousands to install, you could also be lumbered with a pricier insurance premium as a result.

These investments into your property don’t come cheap. For instance, getting a heat pump installed can cost between £7,000 and £13,000, according to the Energy Saving Trust, while a typical solar panel system can set you back £5,500.

However, if you want to insure your home in case something goes wrong, you could be faced with higher costs, or find that some of the kit won’t be covered at all.

Here, Telegraph Money explains what insurance exclusions you could face, and what net zero improvements could mean for your premium.

Watch out for insurance exclusions

As low carbon technology is a relatively new area for insurers, at present it is not always mentioned in policy documents.

Generally speaking, solar panels are included as part of the buildings insurance – but usually only if they have been professionally installed and used according to the manufacturer’s instructions. This means your system would be covered for things such as fire or damage to these systems.

That said, James Daley, from Fairer Finance, warns that some providers exclude cover for storm damage to solar panels from their buildings insurance. One such insurer is Hastings Direct; although its policy does cover the structure of your home should your solar panel system damage it. With this in mind, the age-old adage applies: always read the small print.

You’ll also need to pore carefully over the terms and conditions if you have home emergency cover. Policy wording can vary somewhat between providers; some cover heat pumps but not solar panels, while some make no mention of heat pumps, and so on.

Mr Daley said: “A host of insurers, including Esure and HSBC, have exclusions for claims relating to solar heating systems.”

Given the cost of repairs to these systems can be expensive, it’s perhaps no great surprise to find that some firms are excluding this.

Mr Daley added: “As home emergency policies tend to have fairly low cover limits, most won’t pay out enough to cover the cost of damage, even if they don’t explicitly exclude claims relating to solar panels.”

So what does all this mean? In short, if you’ve made eco upgrades to your home, you’ll need to add them to your list of things to watch out for when buying insurance cover.

If someone mistakenly thinks they are covered when they aren’t, this could leave them significantly out of pocket, should anything happen. There are fears this could deter some from making the switch to low carbon technology.

Bean Beanland, from the Heat Pump Federation, a lobbying group with members from all parts of the energy and built environment sector, said: “Most people would imagine these systems to be covered, especially when they are standard products the Government is encouraging people to invest in and install in their homes.”

Mr Beanland added that insurers who heavily promote their ESG (environmental, social and governance) credentials should include cover for all low-carbon technologies. 

Insurance prices could rise

As more people look to add heat pumps and solar panels to their homes, we are likely to see more insurers moving updating their policies to include these items, and make clear what is and isn’t covered.

But this, in turn, could mean premiums go up – albeit by just a little, according to insurance experts.

Mr Daley said: “If you do end up getting a lot of expensive low carbon technology installed, this could increase [your property’s] rebuild cost. I don’t think it will necessarily increase cost enormously, but in some cases it could push your price up.”

This view is shared by Ryan Clay, associate director of insurance services at SPF Private Clients.

He said: “Solar panels are usually included as part of the buildings insurance, provided the buildings sum insured takes them into account. Having such systems in place would therefore only have a small effect on the premium, depending on the cost to replace them, which will be fairly minor. Insurers do not seem to really rate them as too much of a risk.”

That said, he points out that insurance premiums are, more generally, on the rise. “Eco measures may have a minor effect, but premiums are unlikely to shoot up as a result. Increases are more likely to be down to other factors, such as higher building costs,” Mr Clay added.

According to the latest figures from the Association of British Insurers (ABI), the average price paid for home insurance (combined buildings and contents) in the first three months of 2023 was £315, up 6pc on the same quarter last year.

The trade body attributed this to a combination of factors, such as surges in weather-related claims and more expensive building materials. The war in Ukraine, it added, along with rising energy prices, and the continued fallout from the Covid pandemic (with a shortage of raw materials resulting from factory closure during the lockdowns) have all contributed to building costs going up.

What about the risk of theft?

Another issue which could potentially also translate into higher home insurance costs is the fact that heat pumps are located outside your home, and could therefore be at risk of getting stolen.

Helen Rolph, of insurance comparison site Quotezone.co.uk, said: “If the net zero addition is external to the property, such as a heat pump, this could increase the risk of theft. An insurer will need to take this into account when analysing risk and calculating the premium.”

In a bid to keep costs down, it makes sense to take precautions to boost security.

Phil Nichols, head of home underwriting at insurer Policy Expert, said: “Steps such as installing heat pumps out of sight wherever possible, or setting up home security cameras, can help mitigate the risk of theft.”

Protecting an external device with a cage can also help.

Be sure to keep your insurer informed

If you do decide to go ahead with getting eco measures installed, you need to be aware that whenever you have any building work carried out, or when any major changes are made to your property, you’re supposed to tell your insurer.

Mr Nichols said: “Existing customers looking to have equipment installed would need to notify us ahead of starting any work. This is a standard part of many home insurance policies. Notifying us allows us to alert customers to any Ts and Cs that might apply while work is taking place.”

In practice, anecdotal evidence suggests there hasn’t been a big influx of people disclosing their net zero additions, or asking to get their home insurance policies updated, potentially putting many people’s homes at risk. 

Ryan Fulthorpe, home insurance expert at Go.Compare, said: “If you have any eco measures installed midway through an insurance term, you must inform your insurance provider. Failing to do so could lead to your home insurance being invalidated.”

Policies could change as low-carbon technology grows

At present, most insurers don’t ask whether a customer has solar panels or heat pumps. And insurers we’ve spoken to say they haven’t seen much demand from homeowners for cover for such measures.

“With the growing requirement to convert to eco-energy, this may change,” said David Parker of A-Plan insurance.

It might be the case that over time, it becomes increasingly common to find home insurance policies specifically geared towards protecting energy-saving kit.

For now, at least, we can only watch and wait, and hope premiums don’t rise too much in the meantime.