Oct 2, 2021
Katherine Hamelin saw her home turned into a hazardous waste site. Nicholas Stephens had to rip his house off its foundation. Joe Hurley lost his retirement savings.
And it can all happen because of a dime-sized hole in your oil tank.
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Around 5.5 million homes in the U.S. are still heating their homes with oil, the government says. All three of those victims were from Massachusetts, but oil furnaces remain common throughout the chilly Northeast.
Since this heating style is being phased out, many oil tanks are old and prone to leaks. Those leaks can cost up to $1 million to clean up — and worst of all, if you didn’t seek out the right home insurance coverage, that will all come out of your pocket.
Leaks are more common than you’d think
These oil tank failures are not freak accidents.
State records show an average of 120 heating oil spills per year in Massachusetts alone, according to NBC10 Boston, which has been reporting on the issue for some time.
There’s a reason heating oil furnaces are falling out of style. When the tanks do leak, the oil can contaminate not just your property but your neighbors’ properties, too. In the worst-case scenario, the oil can poison a nearby body of water or underground water system.
Cleanup bills can stretch well into the thousands, if not hundreds of thousands.
When a leak happens, you can end up responsible for expenses like:
- Repairing your basement and other areas of your home.
- Excavating contaminated soil under your property.
- Replacing your damaged possessions.
- Cleanup of any neighboring property and waterways.
- Replacement of the furnace itself.
- Plus any legal fees you might incur.
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Homeowners are rarely protected
Unfortunately, there are two reasons why an otherwise great home insurance policy won’t cover these spills.
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First, these spills are not typically caused by unexpected events that are out of your control, like a natural disaster or fire.
Your insurance won’t replace a roof that wears out or a rusty water pipe that bursts, so old oil tanks that “suddenly” spring a leak won’t make the cut, either.
Second, many home insurance policies specifically exclude damage caused by “pollutants” — and considering the serious environmental risk posed by an oil leak, they certainly qualify.
Some insurance companies do offer a rider that provides extra coverage for oil leaks, but it’s not well advertised. If your insurer doesn’t bring it up, and you don’t know to ask about it, you’ll be out of luck when a disaster happens.
How do you get the right coverage?
It’s possible your insurer will offer to cover spills up to your standard policy limits but charge you higher premiums for owning an oil furnace. Alternatively, you may be able to “buy back” some amount of pollution coverage or tack on a special oil remediation rider.
Pay close attention to the difference between first-party coverage (which protects your own property) and third-party liability (which pays for cleanup efforts and damage to neighboring properties). Some add-ons will only provide one or the other.
Either way, spending an extra $50 or $100 a year is much preferable to the many thousands you’d pay to get everything cleaned up.
Since only certain insurance companies will offer any coverage at all for oil tanks, you’ll need to do your research. Shop around with different insurers, making sure to specify that your home is heated with oil.
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Chris Murray was formerly a freelance contributor with Moneywise.
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