You’ve been searching for your dream home for months if not years and you have finally found that beautiful home in the country that you have always wanted. There is only one problem, it has an oil tank and your current provider won’t write the insurance for the home. These type of scenarios happen to people all of the time. Oil tanks are not always the preferred heating or storage method for a home, but in this article we will find out why it’s a problem for the insurance companies, and possible solutions to make sure you can put insurance coverage on your home.
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Reasons Why Oil Tanks Can Scare Insurance Companies
When an insurance company decides that they will write the insurance coverage on your home, they are taking a large risk. You will pay them a small monthly fee compared to what your actual home is worth. If you divide the value of your home by your monthly insurance payment, you will quickly find out that if your home were to burn down, the insurance company would never make that money back from you. That’s a big gamble on their part. For this reason, just like the rest of us, they can get a bit picky sometimes over situations that can cause a higher risk to their investments.
There are many different types of oil tanks and many different storage locations for those tanks and each come with their own risks and problems. Oil tanks can be stored underground, above ground, in the basement, or even outside right next to the wall of your home. Oil tanks can have a double wall containing the oil inside, or they can have just one containing wall. Just like any mass produced product, there are different manufacturers and they are not all creating quality products. This creates many problems for the insurance companies.
Common Problems:
- Bad Manufacturer: Manufacturers have been sued into bankruptcy due to bad welding that causes leaks.
- Tank Leaks: Above ground or below. Leaking oil is always a bad thing.
- Environmental Hazards: If your tank leaks and seeps into the ground or worse a water source this can cause significant amounts of money to rectify.
- Maintenance: An oil tank can be neglected or rust causing leaks.
- Falling Objects: If your tank is outside, falling objects from the roof are a concern.
- Old Age: Most insurance companies require that tanks be replaced every 20 years.
As you can see from the list above, the problems all revolve around leaking tanks in one way or another. Oil heating isn’t bad for your home, but it could be bad for the environment and the costs to rectify the leaks can be substantial.
Things To Look For When Buying A Home With Oil Heating
The simple things to look for when buying a home with an oil tank are:
- Check for rust
- Prefer double-walled oil tanks
- Make sure the tank is above ground
- The tank manufacture is a reputable company
- The tank age is very important – most insurance companies require that tanks be replaced every 18-20 years.
How to Get Coverage?
Some insurance companies will simply not write insurance for a home with oil heating. The simple solution would be to replace the oil heating for propane or natural gas if that is available. That solution doesn’t always work as that switch can be a large cost to the home owners.
It is still possible to find an insurance company who will write the insurance coverage on a home with an oil tank provided that you take the necessary precautions to ensure there will not be any leaks. Every insurance company will have different recommendations or requirements to insure a home with an oil tank, so it is very important to let your insurance professional know as soon as possible so that they can get everything arranged in order to insure your home.
Most Common Suggestions From Companies:
- Oil Drip Tray With An Alarm: These are little trays that sit under your oil tank. If your tank were to leak into the tray, it will sound an alarm so that it can be fixed immediately. Insurance companies will usually require these for single-walled oil tanks if they offer insurance for homes with oil tanks.
- Double-Walled Tank: An insurance company may request you replace an old single-walled oil tank with a double-walled oil tank.
- Overhead Cover for Outside Tank: If your tank is outside, some insurance companies will require that there is an overhang over the tank to protect it from falling objects.
- Replace Old Tanks: Oil tanks can corrode from the inside without any visible issues from the outside. This is one of the reasons why insurance companies and even companies who fill the tanks with oil will request old tanks be removed.
- Switch to Propane or Natural Gas: Some companies will require a switch from oil in order to insure the home.
- Removal of Old Tanks: You have to remove old tanks that are not operational any longer.
- Surcharges: Some insurance companies will charge you a surcharge on your policy for having an oil tank (non-preferred heating source). This is usually a small annual sum.
The Conclusion
As you can see above, it is possible to insure a home with an oil tank. You can also see from the above that there are very reasonable concerns on the part of the insurance companies and some reasonable actions to take to get your home insured while using the oil tank. It is important to talk to your insurance professional early on in the process to ensure that they can find the right company for your home and get the requirements for that company to insure the home. If your current insurance provider is unable to insure your home with an oil tank, contact our office and we will see if we can find the right coverage for you and your family.