Blog Home Oil Heating Tanks and Insurance

Oct 10, 2024

Are oil heating tanks on my property covered by insurance?

oil tank for home heating in basement

Did you know that if you heat your home with oil, you must inform your insurance provider? The primary heat source in your home can affect insurance coverage and costs.

CBC reported that older oil tanks can be a significant liability for homeowners due to the risks and costs associated with clean-up.

With Canadians turning up the heat for another chilly autumn and winter season, homeowners are turning on their baseboard heaters and other heating devices such as oil heaters. Proper maintenance and insurance implications are essential. In this blog, you’ll learn how oil tank heating can impact your policy and how to heat your home safely.

Three main takeaways about heating your home with oil and insurance:

  • Those who use oil to heat their homes, may see an increase on home insurance coverage costs, or have issues getting approved.
  • Heating your oil with oil can pose a great risk of damages, expensive claims, and environmental clean-up fees, if there is an accident.
  • To help lower costs associated with heating your home with oil, you can look into heat pumps, installing a newer HVAC system, or upgrading to a furnace.

What’s on this page

How does home oil heating work?
How much does it cost to heat a home with oil?
Are oil tank leaks, spills or replacements covered by home insurance?
What is excluded from home oil heating coverage?
Will oil tank heating increase my coverage costs?
How old can an oil tank be for insurance?
Why are oil tank heaters problematic for coverage options?
5 home oil heating tank maintenance and safety tips
Oil tank heating and coverage FAQs

How does home oil heating work?

An oil tank for home heating is a storage container designed to hold heating oil and is used as fuel to power furnaces or boilers in homes.

The heating oil stored in the tank is burned in a furnace or boiler to produce heat, which is then distributed throughout the home via ducts, radiators, or underfloor heating systems. Oil tanks are typically made of steel, fiberglass, or a combination of materials to ensure durability and prevent leaks. They are usually equipped with gauges to monitor oil levels and valves to control oil flow to the heating system.

Heating oil is commonly used in areas where access to natural gas is limited or unavailable. Proper maintenance of oil tanks, such as regular inspections and cleaning, is essential to prevent environmental hazards like oil spills, which can be costly. Due to the risks associated with this type of home heating, homeowners with oil tanks often need specialized coverage.

How much does it cost to heat a home with oil?

In 2023, heating a Canadian home with oil can be a costly endeavor, with average annual expenses ranging from $2,000 to $5,500 for homes consuming between 1,000 and 3,500 liters of oil per year.

This price range is influenced by factors such as location, climate, and the efficiency of heating equipment. In contrast, natural gas heating proves significantly more affordable, with average annual costs for Canadian homes falling between $500 and $2,000.

For homeowners currently relying on oil heating, switching to an eligible heat pump system presents a compelling opportunity for substantial savings, potentially reducing annual energy bills by $1,500 to $4,500.

Are oil tank leaks, spills or replacements covered by home insurance?

Most homeowner's insurance policies cover damage from an oil tank leak, but essential nuances exist. Some companies automatically include oil spill coverage, while others don't.

It's crucial to inform your insurer if your home is heated using oil. Your insurer may ask about the age and type of your oil tank and require inspection reports. Understand what is covered for damage to your home and belongings caused by the oil leak, including the cost of removing contaminated soil and cleaning up the spill.

An example of when insurance would cover an oil tank heater spill might look like this:

Sarah's oil tank developed a crack, causing a significant oil spill. Fortunately, her homeowner’s insurance policy included environmental damage coverage as part of her oil tank rider. The insurance covered cleanup, soil remediation, inspection, testing, and oil tank repair or replacement.

However, it would not cover environmental agency fines if Sarah had been negligent. Regular maintenance and oil tank inspections ensured the insurance fully honoured her claim.

What is excluded from home oil heating coverage?

Coverage providers often will not approve your home insurance claim for an oil tank heating mishap for the following reasons:

  • Pre-existing leaks: If the leak existed before you bought the policy, it's unlikely to be covered.
  • Negligence: Your claim may be denied if the leak was caused by negligence, such as failing to maintain the tank.
  • Environmental damage: While some insurance policies cover cleanup, they may have limits on environmental damage beyond your property.
  • Specific exclusions: Your policy may contain particular exclusions regarding oil tank leaks, so it is essential to review the details carefully.

Here’s an example of when insurance would not cover an oil tank heater spill:

John lives in an older home with an oil tank heater. Over the years, he noticed that the tank showed signs of rust and wear but decided to delay any maintenance or repairs, thinking it would last a little longer. One day, the tank finally ruptured, causing oil to spill into the basement and leak into the soil beneath the foundation.

John called his insurance company, expecting the spill to be covered under his homeowner’s policy. However, after an inspection, the insurance company denied the claim, explaining that the spill was not covered due to neglecting maintenance and not being honest with his provider about the type of heating his home used.

Will oil tank heating increase my coverage costs?

Oil tank heating systems can increase insurance costs in Ontario due to their higher risk. Oil tanks can lead to environmental damage, costly cleanup efforts, and a higher risk of fire or explosion. Maintaining the tank and meeting safety standards can help minimize additional costs.

Premiums for properties with oil tanks may increase by 10-20% due to the higher risk of leaks or spills. Regular inspections and maintenance can help reduce these costs. Don’t forget to compare your options for home insurance in Ontario to find a lower rate.

rusty home oil heating tank

How much does it cost to replace an oil tank?

New oil tank prices have steadily increased in recent years, with most replacement tanks now fetching prices upwards of $5,000.

Homeowners who need to replace a damaged tank may face additional charges from their insurance companies. To illustrate, a customer recently shared that companies may demand soil samples be taken before the tank pad is poured, incurring an additional cost of around $1,000 on top of the new tank expense.

How old can an oil tank be for insurance?

According to the Insurance Bureau of Canada, a home with an exterior oil tank older than 15 years or an interior tank older than 25 years will not be insured. However, it is essential to check with your policy and insurance provider for exact details.

Some factors that can affect coverage include:

  • Age and condition: Older tanks are more likely to leak due to corrosion and wear and tear, which may make insurers hesitant to cover them. If your tank is older, you may need to provide more maintenance and inspection documentation.
  • Type: Underground tanks are often considered riskier than aboveground tanks because leaks can be more challenging to detect. It’s important to also know where the supply line runs, what material it is made of, and where it is located.
  • Company policies: Insurance companies have different age limits for oil tanks, so check your policy for specific guidelines. Discuss your oil tank's age with your insurance agent for advice on coverage and limitations.
  • Consider replacement: Consider replacing your old or worn-out tank with a newer, safer model. This may help you secure better insurance coverage and qualify for upgrade incentives from some providers.

Why are oil tank heaters problematic for coverage options?

Oil tanks, particularly older construction ones, pose distinct challenges for homeowners and their insurance coverage. The potential for leaks, which can result in substantial damage to property and the environment, represents a risk that insurers scrutinize.

The concealed nature of underground tanks, where leaks may remain undetected for extended periods, contributes to the intricacy of the issue. Given the considerable cost of cleanup and remediation, this further compounds the challenge. Oil leaks can be a costly problem, so much so that real estate agents often advise homeowners to replace their tanks when selling a home.

Environmental regulations and liability considerations linked to oil spills can impose substantial financial burdens on homeowners and providers. When combined with the possibility of preexisting leaks and negligence, oil tanks represent a source of uncertainty and potential exclusions within policies.

5 home oil heating tank maintenance and safety tips

Here are five maintenance tips for your oil heating system to consider:

  1. Schedule regular inspections: Remember to have your oil tank inspected annually by a licensed technician. Regular inspections can help identify signs of wear and tear, corrosion, or leaks before they become serious problems. A technician will check the tank, pipes, and connections for damage and ensure that the tank functions safely and efficiently.
  2. Monitor for leaks and corrosion: Regularly check your oil tank for leaks, rust, or corrosion. Look for oil stains, puddles, or unusual odours. Address any issues promptly to prevent environmental damage and costly repairs.
  3. Install a spill containment system: Consider installing a tray or barrier under your tank to catch minor leaks or drips. This can help protect your property from contamination and give you extra time to address a leak.
  4. Maintain proper ventilation: Ensure the area around your oil tank is well-ventilated. Good ventilation reduces the risk of dangerous fumes accumulating and lowers the chances of fire or explosion.
  5. Keep the tank clear of debris: Clear the area around your outdoor oil tank regularly to reduce the risk of damage and facilitate monitoring and maintenance.

Turn up the heat with a better rate for your property

If you need to find a custom quote for your home to cover an oil heating system, our experts are here to help. Start browsing your options for free, today!

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Oil tank heating and coverage FAQs

It's recommended to have your oil tank inspected at least once a year, ideally in the fall before the heating season begins. This inspection should include checking for leaks, corrosion, and proper venting. You should also have your tank cleaned every 3-5 years, depending on usage and the quality of the oil.

Oil tank heaters typically require replacement every 15 to 25 years, depending on the tank's material, maintenance, and environmental conditions. Regular inspections and servicing can help prolong their lifespan and ensure safe, efficient operation.

Ensure your coverage meets the needs of your property

It's always best to be proactive and maintain your oil tank properly. Regular inspections and maintenance can help prevent leaks and ensure your coverage remains valid. Consider learning more about modern home heating options such as HVAC system upgrades and heat pumps.