Oil Tanks and Your Insurance Company

Buying a house in the country or any rural area usually means you have a choice of propane or oil heat.  After decades of heating with oil heat your insurance company is now becoming more finicky about what they will or will not insure.

Home buyers want to ensure they will comply with the requirements of their insurance company prior to signing an Offer to Purchase.  Some home owners find themselves scrambling to obtain coverage after their insurance company tells them that their property is not insurable in the condition it is in.

Most people are aware that 90% of Insurance Companies will require a WETT Inspection prior to insuring a home, this has been common place for many years in Ontario and any experiences Realtor will ensure you are aware of this.

One of the less known requirements of Insurance Companies is the requirement to exceed the TSSA standard for metal thickness in oil storage tanks.  Recently some insurance companies have started to change their underwriting requirements relating to steel oil tanks, and are indicating that “14 gauge, single wall” steel tanks will not be acceptable for insurance purposes.

Wow, you say, how can this be possible, the tank has a ULC  Certification tag and is within the prescribed 10 years?  Well it seems that Insurance Companies, based on their Underwriting experience, have decided that the risk is un-satisfactory.   Some Canadian Insurance Companies will no longer accept 14 Gauge, single wall , steel storage tanks will not be acceptable for insurance coverage.  This could put your mortgage at risk and threaten your closing.

This is a sample standard that some insurance companies are now using:

Metal tanks – Thickness of the metal – Stamped on the tag or sticker on the tank. (Fibreglass tanks do not have to follow this standard) 

  1. 2.00 mm = 14 gauge – this is a very thin metal that is susceptible to breakdown. These are no longer being certified.
  2. 2.3 mm and above = 12 gauge – this is a heavier metal and is more durable than a 14 gauge tank
  3. 2.00 mm = Double Bottom tanks are acceptable but must be replaced sooner than 12 gauge tanks

Even in Northern Nunavut there are strict regulations and the responsibility for oil storage and leaks is firmly pointed directly at the home owner.  This is the wording from their guideline; ´The homeowner is responsible for ensuring that his heating oil tank and accessories are kept in good working order and are in compliance with current environmental and other regulations and codes of practice. In the event of an oil spill, the homeowner is ultimately responsible for cleaning up the spill and further, bringing the affected land back to a condition that meets acceptable environmental standards.

In England they give specific Insurance Advice, which is;

Cleaning up oil spills is difficult and can be very expensive – we’re talking thousands of

pounds. Dealing with a spill will cause you and maybe your neighbors a great deal of

inconvenience. You should have insurance cover and your policy should include:

• the cost of replacing the lost oil

• the costs of cleaning up oil on your own property

• a high enough liability limit to cover you if neighboring land and/or boreholes

are affected

• environmental cleanup for accidental oil loss.

As you can see,  an environmental cleanup can quickly reach a “million dollar” price tag if oil seeps into the ground and contaminates ground water or flows down drainage ditches requiring massive soil removal and cleanup. Relying on your Home Inspector or Realtor to inform you of various Insurance Company requirements is not within their area of expertise.   So as always, Caveat Emptor – Buyer Beware.  A Educated Consumer is a Smart Consumer and will ensure that all the i’s are dotted and t’s are crossed before , “Signing on the Dotted Line.”