The green policies, offered by Fireman's Fund Insurance Co., will allow homeowners whose properties have been destroyed by fires, weather and other covered events to rebuild to criteria set by the U.S. Green Building Council, a Washington, D.C., non-profit that promotes environmentally friendly buildings.
That could include replacing typical home appliances, such as lighting fixtures and electronics, with energy-efficient models. Older heating and air conditioning units could be swapped for newer types that reduce a home's carbon footprint -- the amount of carbon dioxide released into the atmosphere -- while plumbing fixtures could be updated with water-saving models. The coverage extends to the wood used for rebuilding. Lumber culled from companies certified by the Forest Stewardship Council, a nonprofit that encourages responsible management of the world's forests, can be used under the policy.
"We had been very interested in offering something on the personal front for some time," Jason Cassee, a marketing director of personal insurance products at Fireman's Fund, said about the new policies. "We think there is a whole lot of pent-up demand."
Fireman's Fund isn't the first to offer an eco-friendly insurance product. Some earlier green insurance policies targeted companies engaged in energy development, such as wind farms. Japanese insurer Sompo Japan Insurance Inc. gives discounts to more than three million policyholders who drive low-emitting vehicles. About 20 insurance companies world-wide offer pay-as-you-drive polices that lower premiums for people who drive less.
Fireman's Fund began exploring the possibility of a green homeowners' policy several years ago, after introducing a similar policy for commercial properties. The company sold more than 360 green commercial policies in 2007, the first year it was offered, and matched that number in the first four months of 2008. The company estimates close to 1,500 commercial policies will have been sold by the end of this year.
Homeowner policies such as the Fireman's Fund plan will meet growing demand for green products, as well as spur more interest in them, says Evan Mills, a scientist at the Department of Energy who is also a member of the Intergovernmental Panel on Climate Change that shared the 2007 Nobel Prize with former U.S. Vice President Al Gore.
"The world is changing, the market is changing and customers are greening themselves," said Mr. Mills, who wrote a report on insurance company responses to climate change late last year. "Insurance companies are seeing that there is demand from the market."
Fireman's Fund's efforts got a boost in December when the U.S. Green Building Council adopted standards that appraise houses on their design, construction and operation. The council offers certification to homes that meet those standards.
Homes built to green standards can reduce energy costs by as much as 30%, according to the Energy Department, something builders see as a selling factor. Shea Homes' Trilogy unit began offering a green homes product last year, and KB Home and Pulte Homes Inc. are offering homes with green features such as energy-saving appliances and extra insulation. As many as 50% of the homes built by 2010 are expected to have green features, according to the National Association of Home Builders.
It is unknown how quickly green insurance policies will catch on with the public. Though hybrid automobiles are so popular that Toyota recently decided to build its first Prius plant in North America, the cars took nearly a decade -- and high gasoline prices -- to attract a following. Sensitizing consumers to green insurance might also take time.
Though "green home" insurance isn't very expensive -- it costs roughly an additional $70 per $1 million in home value -- it may appeal initially to only a handful of wealthy consumers, rather than families with average incomes. Erron Al-Amin, senior director of personal insurance products for Fireman's Fund, said the company is a premier insurance brand, and green insurance is being positioned as an "eco-luxury" product.
Still, the market for green products is likely to continue growing quickly as more consumers become concerned about the environment and energy costs. Experts say consumers should expect to see more green options if products like the Fireman's Fund's green policy catch on.
"An overarching benefit of green insurance products such as this is that they help consumers to proactively prepare for rebuilding to a greener standard," Mr. Mills said.