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Are Oil Tanks Covered by Home Insurance?

Oil Tank
Table of Contents

About a quarter of Massachusetts homeowners heat their homes with oil. The tanks that supply oil to heaters, furnaces, and heat pumps are built to last decades and can hold anywhere from 250 to 1,000 gallons of oil. These tanks may be located outside your home, in your basement, or underground. Unfortunately, oil tanks don’t last forever. As a crucial part of your heating system, your oil barrel is an integral part of your home. However, your home insurance policy may not pay for the damages that happen to your home or the surrounding landscape if a leak occurs.

Does My Home Insurance Cover My Oil Barrel?

It’s a loaded question, and unfortunately, the answer is most likely no. Your oil barrel contains dangerous chemicals that could pose a risk to your home and the property surrounding it. Improper installation, a tank that isn’t up to proper standards, and age can all mean that your oil tank is a risk waiting to turn into a disaster. Home insurance policies can’t take on that likelihood of risk while remaining affordable for homeowners.

The Dangers Your Oil Tanks Can Cause

It’s true that heating oil isn’t combustible or as likely to result in a home fire as many flammable liquids. However, your oil tank can still pose dangers to your home. Typically, an oil tank contains hundreds of gallons of dangerous chemicals. If your tank leaks, all that oil has to go somewhere.

A heating oil tank inside your home isn’t exposed to the elements which could possibly lead to a longer lifespan. However, if a tank located in your basement suddenly begins leaking, it can result in significant damage to your home. For this reason, an outdoor tank might seem safer. Yet, if you have an underground tank, it could be contaminating the soil around your home without you even realizing it. Sadly, an above-ground oil tank can be equally dangerous.

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A leak will mean that your heating oil sinks into the soil surrounding your home. A significant amount of heating oil could damage your foundation, contaminate nearby groundwater, and affect the property of close neighbors.

3 Reasons Your Insurance Doesn’t Extend to Your Oil Tanks

There’s no doubt that an oil tank disaster could cost you thousands (or even hundreds of thousands) of dollars. Which makes it difficult to understand why your home insurance doesn’t assume the risk. When you consider the way your homeowner’s insurance policy works, these are the three reasons that most commonly lead to a claim denial related to your oil tank.

  • Pollutant Exclusions: Insurance policies often have exclusions that help insurers avoid taking on high-risk situations. Residential fuel spills are typically not covered because policies have exclusions for the escape or discharge of pollutants.
  • Covered Perils: All home insurance policies cover certain disasters that damage or destroy homes. However, these policies are not designed to cover normal wear or improper installation. The most common reason for heating oil tank leakage is corrosion due to normal wear or age, which is not a covered peril on home insurance policies.
  • Policy Limits: Soil remediation, home damages, and groundwater contamination remediation can cost hundreds of thousands of dollars to complete. This means that your policy may only pay for a portion of the damage.

Insurance Coverage that Protects Your Oil Tanks

Since your home insurance isn’t likely to cover your oil tank, it’s important to find a way to get the protection you need. By now, you might be wondering exactly what kind of insurance covers your oil tank. The answer is oil tank insurance. Yes, it sounds obvious, but most homeowners have never heard of it. Oil tank insurance is typically a rider or a stand-alone policy specifically designed to cover spills.

Oil tank coverage may also be called oil damage coverage. The policy should cover oil tank leakage, the cost of cleaning and decontamination, repairs to your tank, and tank replacement coverage. Talk to your independent insurance agent about the dangers your oil tank can pose and the types of coverage available to protect you against the cost of repairs.

Oil Tanks and Insurance FAQ

a man refilling home gas tanks
Man filling a bunded oil tank with domestic heating oil at a home

How Do I Know if My Oil Tanks Are Covered by My Home Insurance Policy?

Your policy contains information about the items that are covered by your home insurance policy. However, certain exclusions may apply to your oil tank. Additionally, it’s important to remember that your homeowner’s insurance only applies to covered perils. This means that leaks that occur due to age or normal wear won’t be covered under the policy. The best way to get a firm understanding of your coverage is to ask your independent insurance agent.

How Can I Avoid Oil Tanks Leaking?

While it’s impossible to predict and avert any possibility of disaster, there are ways to stay informed about the condition of your oil tank. Start by learning the age of your system. If your tank is more than a decade old, it should be inspected routinely for signs of wear that could lead to a leak.

Should I Change My Heating System if I Heat With Oil?

Not necessarily. With the right precautions, oil heat is safe and reliable. When considering a change to the way you heat your home, it’s important to consider the condition of your current system, the cost of making the change, and the energy costs of a new system.

Could My Oil Tank Prevent Me From Getting Homeowner’s Insurance?

If your oil tank is improperly installed, over a certain age, or showing signs of damage, you may need to make some changes to be eligible for home insurance. If you’re planning to buy a home with oil heat, make sure the tank is supplied by a reputable company, is less than 15 years old, and shows no signs of rust.

How Can I Get an Insurance Policy That Covers Oil Tank Damage?

Talk to your independent insurance agent about your current coverage and your existing heating system. Ask about policies that will cover damage related to heating oil leaks.

Learn More About Oil Tanks Covered by Home Insurance

To learn more about how your home’s heating oil tank can damage your home and how to get the coverage you need, contact an independent agent at LoPriore Insurance Agency.

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