Big mistakes to avoid your solar or backup power insurance claim getting denied

South Africans investing in expensive solar and backup power systems should ensure they insure these products properly.

The severe load-shedding of 2023 has resulted in rising adoption of alternative power supply and storage equipment.

According to Trade & Industrial Policy Strategies senior economist Gaylor Montmasson-Clair, South Africa imported solar panels with roughly 2,200MWp capacity in the first half of 2023.

That is nearly half the nameplate capacity of one of Eskom’s newest power stations — Medupi and Kusile.

In addition to a surge in volumes, the value of these imports rose significantly — from about R5.6 billion in the entire 2022 to R12 billion over the first six months of 2023.

Including inverters and batteries in that tally takes the value up to roughly $2.5 billion (R47 billion), compared to $1.7 billion (R32 billion) in the entire 2022.

A picture is worth a 1000 words.
SA has imported $2.5 bn worth of #solarpanels, lithium-ion #batteries and inverters in the 1st half of 2023.
So great to see the exponential rollout of #RenewableEnergy in SA, but what a missed opportunity for local industrialisation! pic.twitter.com/4dr8FI2sw5

— Gaylor Montmasson-Clair (@GaylorTIPS) August 7, 2023

Proper solar and battery backup systems that provide reasonable protection against load-shedding cost tens of thousands of rand.

But fickle electricity supply increases the likelihood of power surges that can damage or permanently destroy the equipment.

In addition, energy experts, security companies, and insurers have warned about a surge in the theft of solar panels in South Africa.

While you can take steps to mitigate against these risks, getting insurance on these products is critical to ensuring your hard-earned money does not go to waste in a worst-case scenario.

However, you also run the danger of getting inappropriate or insufficient cover because navigating the terms and conditions of insurers can be a complex endeavour.

In the sections below, South African short-term insurance company Naked has broken down the main principles to consider when insuring these valuables.

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Buildings vs home contents insurance

Firstly, it is important to consider whether your system should be insured under buildings or home content.

Generally, if something is installed as a permanent fixture to your home, it must be covered by buildings insurance.

This could include the following setups:

• A generator with an enclosure/shed — If you’ve built a little “home” for your generator, it becomes part of your house. Include its value in your building insurance.
• Fixed solar system/panels — Solar systems/panels/geysers are unlikely to be removed, so include their value as well.
• Inverters and batteries hooked up to a fixed solar system — Bundle their value with the installed solar system.

If your items can be unplugged and taken with you when you move, they must be insured under a home contents insurance policy.

These items carry a different risk profile because of their mobility.

Qualifying products include portable inverters, generators, solar panels, batteries, and uninterrupted power supplies.

The latter two can often be found in a combination called a power trolley — which is also moveable.

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Main reasons for denied claims

Naked said there were three likely reasons for repudiating a backup power system claim.

Firstly, if an uncertified provider did the installation.

“To cover your alternative power sources, most insurers require that you have them properly installed by a qualified electrician/technician. This is so that municipal bylaws are complied with,” Naked said.

Secondly, insurers do not cover gradual deterioration like loss or damage caused by wear and tear or exposure to natural forces.

This excludes unforeseen events like a fast-moving storm or a heavy branch falling onto your panels.

Thirdly, insurers don’t provide cover for anything that would typically be covered under a warranty.

“This will still apply even if your warranty or service plan has expired,” Naked said.

“Your alternative power sources generally come with a warranty to cover any manufacturing faults. It’s best to check this before buying anything.”

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Replacement value

Naked recommended that consumers insure their backup power sources at the prices it would cost to replace them as new.

“Most insurers insure your items as ‘new for old’,” Naked explained. “This is known as replacement value.”

“For example, if you bought an inverter three years ago, you would insure it for what it would cost if you had to buy it new today — not what it cost you three years ago and not what a three-year-old inverter would cost.”

To determine the replacement cost, Naked advised that consumers get a quote for installation and include that in the amount.

“If you insure your alternative power sources for less than what they’re worth, you might not get the insurance payout you were expecting if you ever had to claim,” Naked said.

“This is known as underinsurance, and it’s something you want to avoid as far as possible.”

Below are answers for three other commonly-asked questions for solar and backup power users, which Naked addressed in its advice to alternative power system owners.

What happens if I live in a sectional title and the Body Corporate insures the building?

If you own a sectional title unit, the Body Corporate or the managing agent usually buys a single insurance policy, on behalf of all owners, to cover their buildings.

In this case, if you have added any permanent fittings to your unit like solar panels, the recommended route is to notify your managing agent/body corporate.

Tell them that they should increase the sum insured of your unit’s building cover to explicitly cover your alternative energy valuables.

What if I rent a free-standing property and want to install a solar system/”permanent” power source?

This scenario is very unusual, but if you’re in a long-term rental agreement and want to install solar panels/generators, you will first have to get permission from the owner.

When it comes to insuring the items/fixtures, the owner will have to add the value to their building’s sum insured.

The reason is that the alternative power sources, which are fixed to the house and unlikely to be uninstalled, have increased the value of the property and fall under the owner’s policy.

You have effectively gifted the items to the owner and increased the value of their property.

But you should make sure they insure it, because if something bad happens, you, the long-term tenant, don’t want to be left without the use of the items you spent your hard-earned money on.

What if I have rented my renewable energy system?

Increasingly, renewable energy providers are willing to let you rent systems. They install it and you rent it from them for a couple of years.

If this is a route you are going, you should ask the company whether they insure the equipment or if you are required to cover it under your own policy (or your landlord’s).

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Now read: Government launches solar power loan for homes and small businesses