Does Home Insurance Cover Furnace Replacement?

Homeowners insurance covers certain losses, paying to repair or rebuild a home or items within it when covered damage occurs. But does home insurance cover furnace replacement? It depends on the cause of the damage, as this guide explains.

Does home insurance cover furnace replacement?

Does homeowners insurance cover furnace replacement? This is a complicated question to answer. In some cases, insurance will pay for replacing the furnace. In others, it will not be covered. Here's what homeowners need to know.

Situations when homeowners insurance will cover furnace replacement

Homeowners insurance covers furnace replacement if the furnace is damaged or destroyed by a covered peril. Insurance will not provide coverage if the furnace was damaged by an excluded peril, such as a flood. Read our homeowners insurance overview to learn more about what covered perils are.

If a furnace simply gets old, then the answer to the question, does homeowners insurance cover furnace replacement, would typically be no. Aging appliances and routine wear and tear are not covered. Not understanding this exclusion is one of the common mistakes when buying homeowners insurance.

Here are four examples of situations where insurers would typically replace a furnace.

Freezing

Furnace freeze ups occur when the heating equipment becomes coated with ice. This can happen when air flow is restricted. It can also occur when coils to the heating equipment are dirty, or when the coolant leaks.

A freeze-up should be covered by insurance provided it wasn't damaged due to lack of maintenance.

Falling objects

Damage caused by falling objects is generally covered by insurance. If something falls on the furnace, homeowners insurance should pay for replacement or repairs.. So, when strong winds blow over a healthy tree and cause it to land on the unit, then yes, homeowners insurance would cover this.

Fires

Furnace fires can occur for many reasons. A blocked air filter can cause a fire. If gas pressure is too high, this can also result in a fire inside the furnace. Cracked heat exchangers can cause this issue as well. A fire that starts elsewhere in the home could also engulf the furnace.

In most cases, fire damage is covered by homeowners insurance. This includes damage to a furnace resulting from most types of fires. As long as the fire did not occur due to a failure to maintain the unit or due to improper installation, then furnace replacement should be paid for.

Other accidental causes

If there is other accidental damage to the furnace, repair or replacement should be covered by home insurance. In this case, home insurance coverage for furnace replacement would be determined by the specific policy terms.

Some policies are "open peril" policies. These cover accidental damage from all causes unless the cause is excluded. As long as the furnace was not damaged by something the policy specifically stated wasn't covered, furnace replacement would be paid for.

Other policies are "named peril." With these, damage is covered only if it occurs due to a listed cause. Furnace replacement would be covered if it was damaged by one of the specific issues listed in the policy agreement.

Situations when homeowners insurance won't cover furnace replacement

There are many situations when homeowners insurance will not cover furnace replacement. This is normal. While there are four reasons to switch homeowners insurance companies, lack of coverage for a furnace in these situations is not one of them. Here are some examples of situations where homeowners insurance would not pay for a furnace.

Lack of maintenance

Homeowners are expected to take reasonable care of their home. If a homeowner fails to do so, then any losses resulting from that failure will not be covered by insurance. If a homeowner allows furnace coils to become rusted and dirty and a freeze up occurs, this is an example of damage caused by lack of maintenance. Resulting damage to the furnace would not be paid for.

Normal wear and tear

Furnaces (and other appliances) do get old. Homeowners insurance does not cover damage due to this normal aging process. Home insurance would not cover furnace replacement if the damage was caused over time by normal use.

Mechanical problems

Mechanical problems can affect a furnace. They would not be covered by home insurance. If the problems develop in the furnace warranty period, the furnace manufacturer would be responsible for repair or replacement in accordance with the warranty terms.

Earthquakes

Earthquakes are typically excluded from insurance coverage. If a furnace is damaged by an earthquake, insurance would not pay for repair or replacement. Some homeowners buy additional earthquake coverage as an add-on form of protection. This add-on insurance policy should pay for furnace damage related to the quake.

Pest damage

Mice and other pests can cause damage to a furnace. Homeowners insurance would not provide furnace replacement in this situation.

Does furnace or boiler insurance exist?

The best homeowners insurance companies offer many different kinds of protection. But while there are many types of home insurance policies, furnace or boiler insurance does not exist.

Standard homeowners insurance policies will cover furnace repair or replacement if damage occurs due to a covered cause. Homeowners who want protection for non-covered issues, such as mechanical problems, may wish to consider a home warranty or an extended warranty on the appliance itself.

How to file an insurance claim for a damaged furnace

To file an insurance claim for a damaged furnace, homeowners should read their policy terms. Each individual insurer lays out the procedure for filing a claim.

In most cases, the first step will be to make sure the loss is covered. This can be determined by reviewing the policy. If it is an open peril policy, damage will be covered as long as the policy doesn't exclude the cause. If it is a named peril policy, costs will be paid for only if the furnace was damaged or destroyed by a listed cause.

After confirming eligibility to make a claim, homeowners will need to submit the relevant forms. They will need to provide proof of damage and of the cause. An insurance adjuster will work with the homeowner to determine eligibility and to assess whether repair or replacement will be paid for.

Insurance may pay to fix the furnace or to purchase a new one. If the homeowner had replacement value coverage, the insurer would pay for the cost of a new furnace. With market value coverage, a homeowner would get a depreciated payment based on what the furnace is currently worth.

Homeowners should look at their policies carefully to understand the types of coverage they have. For many homeowners, it is best to have replacement value coverage. Homeowners can compare home insurance costs by state to find a policy providing the protection they need at an affordable price.