Does Home Insurance Cover Oil Tank Leaks?

3 minutes can save you hundreds. Enter your postal code below and join thousands of Canadians saving on insurance.

Secure. No Spam. No Fees.

Why You Can Trust MyChoice

MyChoice serves as an independent intermediary between you, financial institutions and licensed professionals without any additional charge to our users. In the interest of transparency, we disclose that we partner with some of the providers we write about – we also list many financial services without any financial gain. MyChoice does not operate a financial institution or brokerage and to ensure accuracy, our content is reviewed by licensed professionals. Our unique position means that we hold no recurring stake in your policy, ensuring our mission to help Canadians make better financial decisions is free of bias or discrimination. 

Article Contents
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated on May 29, 2024

Visit author page
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated May 29, 2024

Visit author page

6 minute read

Article Contents

Unfortunately, your home insurance may not cover oil tank leaks. These days, you’ll be hard-pressed to find an insurer that covers it. However, some insurance companies may offer an endorsement that covers oil leaks for an additional cost.

Home Insurance and Oil Tank Leaks at a Glance

  • Due to the risks involved with oil tanks, insurance companies typically shy away from insuring homeowners who own one.
  • Oil tank leaks are preventable with routine maintenance and extra care in the summer.
  • To prevent accidents and avoid fines, follow the standards set by Ontario’s oil regulatory authority.

Read on to discover why oil tanks can be a major liability and what you can do to protect yourself if you own one. 

Like Oil and Water: Why Oil Tanks and Home Insurance Don’t Mix

Before natural gas became prevalent in Canadian homes, most people used oil to fuel their heating systems. Oil was stored in one of three ways: 

  • Above-ground outdoor tanks: Medium capacity tanks that can be found next to the house; often exposed to the elements;
  • Underground tanks: Larger capacity tanks that are buried beneath soil; can be difficult to find and remove; 
  • Indoor tanks: Smaller capacity tanks that are kept in utility rooms, basements, and garages. 

Eventually, oil tanks fell out of favour due to the volatility of oil prices, the availability of natural gas and other heating alternatives, and the risks involved with oil leaks. 

When an oil tank leaks, it can damage your soil and property and pose serious health and safety risks. The cost to repair and remedy any damages caused by an oil leak can set you back hundreds of thousands of dollars. To be exact, the average estimate for remediating damages caused by home oil tank leaks is about $250,000 to $500,000. 

And therein lies the rub. Unlike water leaks and natural gas leaks, which are typically covered by most home insurance policies, oil tank leaks are not usually covered. For many home insurance companies, oil tanks are simply too risky to insure. Some providers will even flat-out refuse to provide coverage for properties with oil tanks, especially if the tank is over 20 years old. 

How Can I Get Coverage for an Oil Tank?

Some insurance providers offer an “Escape of Fuel Oil” endorsement that homeowners can add to their policy for an added rate. This add-on covers:

  • Direct damage to property covered by the policy
  • The cost of cleaning and decontaminating soil (up to a maximum of $150,000)
  • The cost of replacing certain plants
  • Civil liability (up to a maximum of $150,000)

Oftentimes, this type of endorsement does not cover the tank, pipes, or apparatus that caused the damage but only damage done to the property and its contents. This endorsement does not usually cover any efforts to remedy environmental damage like groundwater contamination either.

Here are some other stipulations you must meet to be eligible for coverage:

  • The oil tank must not be over 20 years old
  • All components of the storage tank system must carry a certification mark showing that they meet regulation standards
  • Tanks must be double-walled with an inner plastic liner and solid concrete pad
  • The tank must be bolted down to prevent potential damage during earthquakes

Another thing you can do is apply for high-risk insurance, a type of policy geared toward properties that are deemed riskier to insure than others, such as heritage homes, vacant dwellings, and houses with older plumbing, electrical, and heating systems.

Problems Caused By Oil Leaks

These are the main reasons why most insurance companies and real estate agents often want nothing to do with oil tanks:

Oil tank leaks pose a bevy of problems to one’s property and surrounding area, such as:

  • Soil contamination: Leaked oil can seep into your soil and destroy your plants. Contaminated soil can also pose health risks to your pets and children, such as skin irritation, respiratory issues, headaches, and dizziness.  
  • Water contamination: Leaking oil can make its way to private and public water sources, contaminating your own and your neighbours’ drinking water. Local wildlife may also be affected by contaminated water sources.
  • Property damage: Underground oil tank leaks can change the quality of your soil and affect the integrity of your home’s foundation. Above-ground tanks, on the other hand, can become structurally unsound and collapse in strong winds and earthquakes. 
  • Fire hazard: Oil is highly flammable. When it comes into contact with a fire source, such as a match or cigarette butt, it can set your property ablaze in seconds. 

Homeowners must hire licensed professionals to perform routine maintenance checks to ensure their tanks are safe and sound. 

If a tank leaks and compromises the surrounding area, you’ll have to pay for the cost of removing, replacing, and disposing of oil-soaked soil. You’ll also have to shoulder any repair work needed for your neighbour’s property, public water systems, and even your tank system itself. Generally, oil tank replacement costs around $1,200 to $4,500 in Ontario. 

On top of all this, you may face fines and legal costs if your oil tank causes significant damage to public property. 

Removing an oil tank from your property is a lengthy and expensive process. For an underground tank, you’ll need to hire certified professionals to dig it out. Attempting to do it yourself may result in a spill that could cost you even more down the line. Some indoor tanks, on the other hand, are built-in and bolted to the ground, requiring removers to destroy a part of your window or doorway to get it out. 

How to Prevent an Oil Tank Leak?

If you plan on moving into a home with an existing oil tank, keep the following tips in mind to prevent leaks:

Assess Your Tank’s Age

Oil tanks have a lifespan of about 15 to 20 years, with an increased risk of leaks as they age. Tanks manufactured after 1980 usually have a manufacturing date alongside its nameplate. If you can’t find the nameplate, the regulatory body that governs fuel oil storage insists that homeowners remove or replace the tank.  

Perform Routine Inspections

Inspect your oil tank for signs of damage and leaks at least once a year. Look for rust, corrosion, and signs of condensation on the bottom of your tank — all this can weaken your tank’s walls and lead to spillage. 

You should also check the ground underneath your tank. If it appears dark and emits a strong odour, it’s time to call a professional.  

Get a Professional to Inspect and Clean Your Tank

Even if a tank looks fine on the outside, it could be corroding from the inside. This is why it’s important to have your tank inspected by a licensed professional. They’ll have the tools and equipment to check vent pipes, filters, and gauges, as well as replace anything that might be on the fritz. They may also offer to install a carbon monoxide alarm to prevent you and your family from ingesting harmful fumes. 

Only Use Clean Oil

Never fill your tank with old or recycled oil. These are far more likely to get contaminated by water, sludge, and bacteria, which lead to corrosion and leakage. 

Have a Spill Kit On Hand

Most safety supply stores carry spill kits made specifically for remedying oil tank leaks. If you can’t find one, keep a pan, some towels, and kitty litter near your tank in case of a sudden spill. The kitty litter should help absorb minor spills and prevent oil from spreading further on your property. 

Get an Oil Drip Tray

Oil drip trays can help keep a leak from getting out of hand. When oil leaks into the tray, it triggers an alarm that tells you you’ve got a leak to remedy. 

Cover Your Outdoor Tank

Excess heat, rain, snow, and falling objects can all damage an outdoor above-ground tank. An overhang can provide ample protection and save you hundreds of dollars in repairs. Some insurance companies actually require homeowners to purchase an overhang to mitigate risks. 

Keep the Tank Full in the Summer

Humidity can lead to condensation, which eventually leads to corrosion. Keeping a tank full during warm summer days can reduce the risk of moisture accumulating inside your tank. 

Replace Your Oil Tank

If you can afford it, save yourself the trouble and replace your oil heating system with one that relies on propane or natural gas instead. 

If you must stick with oil, replace an old or damaged tank as soon as possible. Refer to the next section for rules and regulations for new and old oil tanks. 

Common Causes of Home Oil Tank Leaks

Understanding Regulations on Oil Tanks

The Technical Standards and Safety Authority (TSSA) regulates the “transportation, storage, handling, and utilization” of fuels in Ontario, such as natural gas, hydrogen, propane, butane, gasoline, diesel, and fuel oil. Some of the regulations imposed on oil tanks by the TSSA include:

  • Before oil tanks are used, filled, maintained, or removed, they must be registered and assigned a unique registration number.
  • Underground oil tanks that have not been in use for over two years must be removed to reduce the risk of environmental damage from oil leaks.
  • Oil tanks older than 25 years old must also be removed. If you don’t know the age of your tank, the TSSA expects you to assume the tank is past its removal age.
  • Oil tanks must be removed by a TSSA-registered fuel oil contractor.
  • If a leak occurs during the removal process, you must contact the Spill Action Center of the Ministry of Environment.

On top of this, underground and aboveground storage tank systems are also required to have:

  • Corrosion protection
  • Spill containment
  • Containment sumps (if applicable)
  • Liquid- and vapour-tight connections
  • Overfill protection
  • Secondary containment for aboveground tanks
  • Double-walled for underground tanks

Key Advice From MyChoice

  • Most insurers won’t provide coverage for oil tank leaks.
  • Some insurers may offer a special endorsement that covers “Escape of Fuel Oil” for an additional rate.
  • Oil tank leaks are preventable with proper maintenance and by following the standards set by the TSSA.
  • Before buying a house, make sure you get a home appraisal to assess whether the home has an existing oil tank and figure out the potential costs of removing and/or maintaining it. 

Congratulations! You made it to the end!

Now, here is the easy part: complete your quote in under 2 minutes

Discover More About

Western University launched the Canadian Severe Storms Laboratory to research severe weather patterns. Learn about the CSSL’s effect on insurance.
Home insurance deductibles can help you save on your yearly premiums. Read on to learn how to choose the right amount for maximum savings.
Making home insurance claims can result in higher monthly premiums. Click through to learn about different scenarios and how you can avoid premium increases.

Even More Ways To Save