Find Cheaper Homeowners Insurance

Homeowners insurance coverage and furnace

Does Homeowners Insurance Cover Furnace?

Homeowners insurance coverage and furnace

Millions of households in the US rely on the furnace to heat the home while furnace maintenance usually goes overlooked until something goes wrong. As millions of households depend on the furnace to heat the home throughout the winter, it’s important to have a backup plan for what you should do if something happens to the furnace. The homeowners policy ties into this and it may be able to help you, depending on the circumstances surrounding the breakdown. In some cases, you will be covered by home insurance while in others you’ll have to pay out of pocket.

Does homeowners insurance covers furnace? Homeowners insurance covers furnace damage only if it was caused by a named peril in the policy. This includes perils such as fires, water leaks, hurricanes, or other non-maintenance-related issues. If the furnace broke down as a result of a lack of maintenance, homeowners insurance won’t pay for the replacement. Depending on your insurance policy, you have to provide evidence that the furnace was destroyed or damaged by one of the named perils. HO-3 policies usually have 16 named perils which we’ll cover below.

Insurance companies will not cover repairs and replacements for furnaces in all cases. The most common reason is misuse. If the furnace was misused and damaged, the claim will be rejected. The same applies to bad installations on new furnaces. The furnace must be maintained and general wear and tear will not be covered under any homeowner policy. It is up to the homeowner to maintain their furnace in top condition. The same exclusion would apply if the furnace was damaged by a natural disaster not named in your policy – review your policy to find out if you’re covered.

Why You Need Equipment Breakdown Coverage

There is a special endorsement policy on homeowners insurance called “Equipment Breakdown Coverage” that you can add for as little as $30/year. This policy protects equipment and appliances like furnaces from malfunction and you can file a claim much easier. If your current policy has no mention of furnace replacement, you should consult your agent for equipment breakdown coverage and add it to your policy. This will cover virtually all machines in your household that are prone to breaking down due to a number of reasons. This coverage is similar to an extended warranty that you get from your furnace manufacturer, but it extends to all appliances in the household.

Equipment breakdown coverage adds comfort and peace of mind knowing that each appliance in your household is covered. It also covers electronics and equipment that are integral to your home. If any of it is destroyed or damaged due to unpredictable accidents such as mechanical breakdowns or power surges, you will be covered.

Every household should have equipment breakdown coverage on their homeowners policy even if their appliances are new. The main issue with appliances is that more than 20% of all fail within the first 4 years of use. This means you could end up paying thousands of dollars for replacements even if your appliances are new (if your warranty expires). 

If your new furnace stops working because of any mechanical or accidental breakdowns, your finances will be protected with equipment breakdown coverage. Compared to an extended warranty for furnaces, this coverage is a great deal considering it also includes all other appliances and equipment in the home.

Costs Of Replacing Furnace

The main reason you should buy equipment breakdown coverage is that it covers all machinery. Installing a new furnace will cost over $6,000 on average and if your furnace warranty is void, you’ll have to pay for a replacement yourself. You never know if the manufacturer is going to honor their warranty when you reach out to them after 3 years of use. Even if they honor the warranty and replace your furnace, you’re like to end up paying a few thousand dollars for installation. 

Equipment breakdown coverage will cover you for all mechanical failures except predictable ones. Make sure to check on your furnace often to find out if you have to replace it. If your furnace is way overdue on a replacement, the insurance company can refuse to pay out on the claim. If the furnace is kept in excellent working condition and you have equipment coverage insurance, you will automatically be covered.

Equipment Breakdown Coverage: Appliance List

Equipment breakdown coverage is an affordable endorsement that you can add to your existing HO-3 or HO-5 homeowners policy with any insurer. It is a special policy that allows you to save money on expensive repairs on appliances. Aside from the furnace, you’re covered for a dozen different appliance units. The following appliances in the household are going to have coverage:

  • Heaters and boilers
  • Smart security systems
  • Dishwashers
  • Washers and dryers
  • HVAC units
  • Electrical systems
  • Well pumps
  • Swimming pool equipment
  • Refrigerators
  • And more (depending on insurer)

How Insurance Pays For Furnace Claims 

If you have equipment breakdown coverage and your furnace breaks down, the insurance company will pay out on your claim. You might not even need an equipment breakdown coverage if the furnace broke down from a named peril on your homeowners insurance. As long as the furnace didn’t malfunction out of a lack of maintenance, your claim will be approved. 

There’s a deductible for every claim. This deductible ranges between $500-1,000 on most homeowners insurance plans. The insurance company gives you the option to set a fixed deductible at the start of your policy. If you pay more on a monthly basis, you pay less on the deductible. The bottom line is that they’ll pay out the full replacement cost of the furnace that will include installation. Furnace installation can cost between $4,000-7,000 with labor costs included.

If the furnace explodes, it can cause a lot of damage to your home and even surrounding homes. In this event, you can claim liability insurance to cover the damage to your neighbor’s property. Most homeowner insurance plans have over $250,000 in liability insurance. You can optionally increase this liability coverage with umbrella insurance.

What Is A Furnace?

A furnace is a simple traditional heating system that allows warm air to circulate throughout the home via air ducts. The furnace blows heated air and distributes the heat. Back in the old days, the furnace is usually powered by gas or fuel. However, there are electric furnaces available now for easy use. Due to the convenience of furnaces, it remains to be one of the most popular heating systems in the country.

Damage To Furnace Due To Calamities

Are you scared that your newly installed furnace can just be destroyed by storm and earthquakes? Don’t worry! Your insurance company is likely to replace the damaged furnace if it is caused by a natural disaster. The usual calamities covered by your homeowners insurance will also provide protection for your furnace. Provided that the incident happens because of an accident, your insurance company will cover for this cost.

Damage To Furnace Due To Mechanical Breakdown

Relatively new furnaces may suddenly breakdown. This instance isn’t usually covered by basic homeowners insurance unless you choose to purchase a more comprehensive insurance plan. If you opt for the latter, you might be able to file an insurance claim for replacement or repair costs.

Check the Warranty of Furnace

If you only have a basic insurance policy, you can check the warranty of your furnace. Since basic insurance policy won’t cover for the damage, the equipment warranty may be able to cover for the cost of the furnace damage. Your warranty may be able to save you the trouble of filing an insurance claim and it can also keep your insurance records clean.

Damage To Furnace Due To Wear and Tear

If your furnace is damaged due to constant and consistent use over several years, it is highly likely that your insurance company wouldn’t pay for it. Compared to damage due to accidents or mechanical breakdown, wear-and-tear isn’t incidental and it is unavoidable. Therefore, you will bear all the replacement cost if the damage happens because your unit is old and rusty. However, you can opt to purchase insurance solely for your furnace or your appliance. In this case, you may be able to get reimbursement for your old furnace unit. You can also use your separate insurance policy to cover for any excess cost for replacing your old unit.

Damage Caused By Furnace To Property

After talking about the insurance coverage for furnace damage, you may forget that your furnace can also cause damage. If your furnace has faulty wires, it may lead to a fire, which results in damages to your property.  In this case, your insurance company should be able to shoulder all the expenses from the damage caused by the furnace to your property. 

How To Prevent Furnace Damage?

As the saying goes, “Prevention is better than cure.” You must perform regular maintenance and check-ups on the furnace to prevent damaging the equipment. It is important to check the thermostat of your furnace to see if it is functioning properly. The filter on your furnace should also be checked regularly to see if the filter is clogged by dirt and debris. When the furnace is in use, it is also important to make sure that the blower isn’t overworked.

Leave a Comment