Does home insurance cover an underground oil tank?
It depends on your insurer, and cover may be partial. Buying a house with an underground oil tank? Get in writing what the policy pays for a leak.
Updated · By 
Ben Sikes
Does homeowners insurance cover underground oil tanks?
Whether homeowners insurance covers an underground oil tank depends on your insurer, and the cover may be only partial. Before your inspection window closes, get a written quote that names the tank and says what the policy pays if it leaks. In New Jersey, the insurance regulator says "Most homeowners policies exclude pollution liability caused by oil tanks", with an option to buy back $100,000 of it for an extra premium. If the answer is little or nothing, test the soil and price a separate tank plan.
Key takeaways
- New Jersey insurers may offer the pollution buy-back only once, and declining bars it on future policies.
- New Jersey's regulator warns that many insurers' rules may refuse a home with an oil tank, or refuse it for the tank's age.
- ProGuard's stand-alone tank plan only starts after a soil test comes back clean, so test before closing.
How do insurers handle an oil tank?
Tank coverage comes in two parts. One pays to clean up your own land, which New Jersey's regulator calls first-party coverage. The other is liability: it pays when escaped oil leaves you liable to someone else.
New Jersey's Department of Banking and Insurance says insurers there use one of four approaches:
| How many insurers, and the approach | What the policy pays |
|---|---|
| Most: exclude tank pollution, sell a buy-back | Nothing for your own land. Liability only if you buy it back, for an extra premium |
| Several: add a surcharge for the tank | Nothing for your own land. Liability up to your policy's liability limit |
| Some: include tank coverage at no extra charge | $10,000 to clean up your land, and escaped fuel liability capped at $50,000 |
| A few: cover the tank under liability | Liability up to your policy's liability limit |
Insurers in the third group may offer higher limits, up to $300,000. The surcharge and liability-only groups cover above ground tanks too. The same page warns that many insurers' underwriting guidelines "may prohibit the writing of risks with oil tanks on the premises or based on the age of the tank". In New Jersey, then, the tank can decide whether you get a policy at all, not only its price.
In New Jersey, the buy-back "may only be offered once". If you decline, the regulator says you "can not buy the coverage on any future policies". Other states may differ, so ask your insurance agent which pattern your quote follows.
What does oil tank coverage cost?
You can add oil tank coverage three ways.
- A buy-back or endorsement from your insurer. New Jersey's regulator doesn't list a premium. The 2006 Connecticut report describes an Insurance Services Office endorsement for escaped liquid fuel, with property options from $10,000 and liability options up to $300,000. Ask your insurer whether it offers one and at what price.
- A fuel dealer's tank program. The Connecticut examiner said such a program is "not really an insurance policy from the homeowner's point of view". Rather, "it is a contract with the fuel oil company". If the dealer won't pay, the report says your only recourse is to sue the dealer for breach of contract. Ask for the contract and read who pays a claim.
- A stand-alone tank plan. ProGuard's underground tank plan starts at $549 per year. It pays up to $100,000 per claim, with a $2,500 deductible, and contributes $1,500 to a new tank.
Here is the ProGuard plan in a year with a leak, at its starting price. You pay a year's premium plus the deductible: $549 + $2,500 = $3,049. Add the cost of the soil test the plan needs before cover starts. The plan pays cleanup up to its limit, and anything past that is yours.
The price varies with where the tank is and whether your oil dealer partners with ProGuard. You can send the soil test within 30 days of paying, and ProGuard accepts tests only from certain labs, so ask which before you book one.
Kept prices every line of an inspection report for $79, usually under 4 hours, and marks the ones that need a professional quote.
How serious is a leak for the new owner?
The regulator says the cost to clean up a leak's environmental damage "can run into millions of dollars", particularly when water supplies or aquifers are hit. It also says "oil tanks may ultimately leak" and urges owners to have them "tested and inspected" and to replace old ones.
Federal tank rules don't cover a home heating oil tank. The Environmental Protection Agency lists "Tanks storing heating oil used on the premises where it is stored" among those that do not need to meet federal requirements. It adds that "some state and local regulatory authorities may regulate these types of tanks." Check with your state's environmental agency for the rules at this address.
Ask about wear too. In 2006, an examiner at Connecticut's Insurance Department spoke to state legislative researchers. She said "most homeowner's policies did not normally cover leaks caused by the normal deterioration of the tank and related piping". That is the last question on the list below, and the one that matters most for an old tank.
What should you ask your insurance agent?
Send these to your agent and ask for the answers in writing:
- Which approach does this policy use for an underground oil tank?
- Does it pay to clean up my own land, or only damage to others?
- Is a pollution buy-back or escaped fuel endorsement offered? What is the limit and the premium?
- Does the tank's age or material change the quote, or stop the insurer from writing the policy?
- If the tank leaks from wear after closing, what does the policy pay?
What should you ask the seller for?
Ask for what makes the tank insurable and testable before your deadline:
- The tank's age, and any past test or tank records.
- Access for a soil test before your window closes, at the seller's cost if you can get it.
- Whether the seller has a tank plan. ProGuard says its coverage "is transferable," so ask whether the seller's plan can move to you.
If the test or your insurer's answer changes your request, what to ask for after a home inspection covers how to size it. Your contract sets the exact deadline and terms, so confirm the dates with your agent.
What if the seller says no?
Pay for the soil test yourself if the seller won't. Then send the result to your insurance agent with the questions above. If no insurer will write the policy with the tank in place, weigh that with the rest of the report in when to walk away after a home inspection.
Can home insurance pay to replace an oil tank?
Don't assume it will, and ask your insurer. In 2006, an examiner at Connecticut's Insurance Department said the department was "not aware of any insurance company" offering homeowners a policy that covers "the costs of replacing an underground fuel storage tank". ProGuard's $1,500 contribution to a new tank sits outside a homeowners policy.
Should you buy a house with an underground oil tank?
Get two answers first: a clean soil test and an insurance quote that names the tank. If both come back and the price still works, the tank is one line in your request. A clean test is today's answer. What your policy pays for a leak from wear is the cost you carry after closing. If either is missing when your window closes, you're buying the risk blind.
How do you know what the rest of the report is worth?
The rest of the report needs dollar figures too, but the tank line still needs the soil test and your insurer's answer. If the tank is one line on a long report, upload your inspection report to Kept so your remaining days go to the soil test and your insurer.
Sources
Cost figures are modeled from public wage and materials data unless a line says observed. Kept is accountable for the numbers on this page, and corrections go to support@usekept.com. How we price.