Why Are Insurance Customers Turning to Geothermal?

Insurance customers are concerned about sustainability, their environmental impact, and cutting energy costs. One of the ways homeowners have found to help both the environment and their wallets is turning to geothermal systems for their heating and cooling needs. According to the U.S. Department of Energy, there were 2 million commercial and residential geothermal heat pumps in use across the country in 2019, but they expect that number to rise to 28 million by 2050.

As this technology becomes more popular, adjusters should expect to see geothermal systems included more frequently in claims. Geothermal systems pose unique claims resolution challenges, and objective expert assessments may be required to help resolve claims accurately.

Closed horizontal loops are good for properties with more land that can be used for pipes, which are buried in trenches hundreds of feet long and several feet deep.

What Are Geothermal Systems?

Knowing the fundamentals of geothermal systems can help adjusters settle these complex claims. This equipment relies on the Earth’s constant subsurface temperatures to heat and cool off a home, instead of burning oil or natural gas. Loops are buried below the frost line where temperatures are consistently 50-60 degrees Fahrenheit. Heat is absorbed or expelled, depending on the policyholder’s preferences. The loops feed into the home’s air handler so the air can be circulated throughout the space.

Standard closed loop systems use a mix of water and antifreeze that circulates throughout the pipes and is reused.

 Why Are Insurance Customers Turning to Geothermal Systems?

  1. Sustainability – The Earth maintains an average temperature between 50-60 degrees underground year-round, so geothermal energy is renewable. Geothermal systems are more sustainable than HVAC systems fueled by oil or natural gas. They’re more efficient, too, reducing household energy use by 30-60%.
  1. Environmental Impact – Closed loop systems don’t discharge anything into the resource the energy is drawn from or emit greenhouse gasses, so they have a low environmental impact.
  1. Savings – By investing in geothermal systems, policyholders can save money they’d be spending on other resources, such as electricity, natural gas, or oil. While there may be a large outlay of funds upfront, energy savings defray that cost over time, and homeowners eventually reap the cost-saving benefits. Federal tax credits are also available for homeowners using geothermal heat pumps, providing an additional financial incentive.

Geothermal systems must be buried within the earth or at least 8 feet of water and may require drilling to install.

Which Perils Impact Geothermal Systems?

Geothermal systems are different from more traditional HVAC systems, but they are impacted by similar causes of loss that adjusters need to verify before settling a claim. Certain equipment, like the air handler or heat pump, will likely be connected to the electrical grid. These components are susceptible to high voltage surge. In the event of electrical problems or a lightning strike, these components could ignite a fire. They could also be damaged by smoke and fire from a different point of origin.

External components connecting the home to the geothermal system’s loops could be susceptible to freezing conditions and foreign object impact, particularly during windstorms. Geothermal systems are also vulnerable to impacts from wear and tear. Finally, it’s possible for non-damaged equipment to be included in claims.

This geothermal heat pump’s control board and wiring show evidence of arcing associated with high voltage surge.

How Can Geothermal Systems Complicate Claims?

In addition to verifying cause of loss for geothermal systems, adjusters may have a more difficult time determining an accurate settlement. Upfront costs for geothermal equipment is on average 30%-40% higher than other systems, and replacement costs could be higher, too. Furthermore, given that so much of the equipment is buried, labor and the use of heavy machinery to access it mean additional costs.

However, repairs to the surface level components may be sufficient to return a geothermal system to pre-loss condition, avoiding unnecessary equipment replacement. An expert may be required to confirm the cause and scope of damage, determine the system’s reparability, and provide recommendations for Like Kind and Quality equipment. Adjusters need to ensure they’re consulting HVAC experts who are familiar with geothermal systems.

Closed vertical loops are among the multiple types of loops used in geothermal systems. They are frequently used for residential or commercial properties with small lots. Pipes are buried hundreds of feet deep and connected with U-bend pipes.

 HVAC Investigators (HVACi) can quickly match claims for geothermal systems with qualified subject matter experts well-versed in all types of residential and commercial HVAC systems. HVACi simplifies how claims are settled through its fact-driven processes and use of engineering best practices, relying on just the facts to enable insurance professionals to settle HVAC claims more quickly and with a higher degree of accuracy.

Submit an assignment for a geothermal system, or any other commercial or residential HVAC system, to find out how HVACi can help you find the next best steps.


Learn more about types of geothermal systems