Here’s some good news: your homeowners insurance keeps your furnace protected against many types of damage.
Your furnace heats your house or apartment, keeping it toasty in cold weather. It’s one part of a larger heating, ventilation, and air conditioning (HVAC) system, which works together to control your indoor climate.
Let’s talk about what can go wrong with your furnace, and how your home insurance can help.
TL;DR
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Key terms to know about furnace insurance coverage
| Term | What it means |
|---|---|
| Dwelling Coverage (Coverage A) | The part of your homeowners insurance that covers the physical structure of your home, including permanently installed systems like your HVAC and furnace. |
| Open Perils | A coverage approach that protects against all causes of damage except those specifically excluded in the policy. Also called all-risk coverage. |
| Named Perils | A more limited coverage approach that only covers damage from causes explicitly listed in the policy. |
| Equipment Breakdown Coverage (EBC) | An optional endorsement that extends your homeowners policy to cover mechanical, electrical, and pressure-based failures of home systems and appliances. |
| Mechanical Breakdown | Failure of a mechanical system due to internal malfunction, not caused by an external covered peril. Typically excluded from base homeowners policies. |
| Deductible | The amount you pay out of pocket before your insurance coverage kicks in on a claim. |
What does homeowners insurance cover for your furnace?
Your furnace, and your HVAC system in general, falls under Dwelling Coverage (Coverage A) of your base homeowners insurance policy.
That means it’s protected against what the industry calls open perils. Most causes of damage are covered, including power surges, fire, and lightning, with a few important exceptions.
What’s not covered under a base policy:
- General wear and tear. Appliances get old and break down. That’s on you, unless the unit is still covered by a manufacturer’s warranty.
- Flood damage. If rising water damages your furnace, your standard homeowners policy won’t cover it. You’d need separate flood insurance. That said, other types of water damage, like from a burst pipe, would likely be covered.
- Mechanical breakdown. A base homeowners policy doesn’t cover mechanical failure, but you can add an Equipment Breakdown endorsement to fill that gap.
What is Equipment Breakdown Coverage for a furnace?
Equipment Breakdown Coverage (EBC) is an optional endorsement you can add to your homeowners policy. It covers your furnace against damages that your base policy excludes, including mechanical, electrical, and pressure-based failures.
At Lemonade, EBC provides up to $100,000 in coverage with a $500 deductible.
And it covers a lot more than just your furnace. EBC extends to other home systems and appliances too, including dishwashers, security systems, hot water boilers, and sump pumps.
Would homeowners insurance cover furnace replacement?
If your claim is approved, your furnace would be covered up to your Coverage A limit. Here’s what that looks like in practice:
- A new furnace costs $8,500 to purchase and install
- Your Coverage A maximum is $100,000
- You pay your $500 deductible
- Your insurance covers the remaining $8,000
Replacement costs vary depending on the type of furnace and the size of your home:
| Furnace type | Lower cost | Higher cost |
|---|---|---|
| Electric | $1,800 | $7,300 |
| Natural gas | $2,800 | $9,500 |
| Oil | $4,500 | $8,000 |
Real-world scenarios: When does homeowners insurance cover furnace damage?
The coverage rules above are useful, but they’re easier to understand in context. Here’s how they play out in real situations.
Scenario 1: Furnace damaged by a lightning strike
A severe thunderstorm sends a lightning strike to your home’s electrical system, causing a power surge that fries the circuit board in your gas furnace.
| What’s covered | Lightning and fire damage are covered perils under Dwelling Coverage (Coverage A). This claim would likely be approved. |
| The financial outcome | You pay your $500 deductible. Your insurer covers the cost of repair or replacement up to your Coverage A limit. |
| One thing to know | This is one of the clearest examples of a covered furnace claim under a standard homeowners policy. |
Scenario 2: Furnace breaks down due to mechanical failure
Your 8-year-old natural gas furnace stops working in January. A technician diagnoses a failed heat exchanger, a mechanical breakdown with no external cause.
| What’s covered | Under a base homeowners policy, nothing. Mechanical breakdown is a standard exclusion. |
| With Equipment Breakdown Coverage | The repair or replacement would likely be covered up to $100,000, minus your $500 deductible. |
| One thing to know | This is exactly why EBC is worth considering for homeowners with older HVAC systems. |
Scenario 3: Furnace damaged by a burst pipe
A pipe in your basement freezes and bursts during a polar vortex, flooding the utility room and damaging your furnace.
| What’s covered | Sudden and accidental water damage from a burst pipe is covered under a standard homeowners policy. Both the water damage and the furnace damage would likely be covered under Coverage A. |
| What’s not covered | If the damage were caused by rising floodwater from outside the home, you’d need separate flood insurance. |
| One thing to know | The source of the water matters. Inside the home, burst pipe — likely covered. Outside the home, rising water — not covered. |
Scenario 4: Old furnace stops working due to age
Your furnace is 20 years old and simply stops functioning. No covered peril caused the failure. It’s just worn out.
| What’s covered | Nothing. General wear and tear is excluded from both base homeowners policies and Equipment Breakdown Coverage. |
| The financial outcome | Replacement costs would be entirely out of pocket, unless the unit is still under a manufacturer’s warranty. |
| One thing to know | Regular maintenance is the best way to extend the life of your furnace and avoid this situation. |
Scenario 5: Furnace damaged in a house fire
A kitchen fire spreads to adjacent areas, causing smoke and heat damage to your HVAC system, including the furnace.
| What’s covered | Fire is a covered peril under standard homeowners insurance. Furnace replacement would be covered as part of the broader fire damage claim. |
| The financial outcome | Subject to your Coverage A limit and deductible. Your insurer would typically send an adjuster to assess the full extent of damage before approving the claim. |
| One thing to know | Document everything before cleanup begins. Photos and records of damaged equipment speed up the claims process significantly. |
How can I keep my furnace in good shape?
The best furnace claim is the one you never have to file. Here are the most common causes of furnace damage and how to avoid them:
- Skipping maintenance. Clean or replace air filters regularly, and schedule annual professional inspections. Many HVAC companies offer seasonal discounts.
- Overuse during extreme cold. Running your furnace hard for extended periods increases the risk of damage. Give it a break when you can.
- Power surges. Surge protectors can guard your furnace’s electronic components against unexpected voltage spikes.
- Improper installation. Always use certified, recommended technicians. A poor install can void warranties and create long-term damage.
- Dust and debris. Clogged ducts reduce airflow and put extra strain on the unit. Keep them clear.
Before we go…
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Furnace insurance coverage FAQs
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Would homeowners insurance cover furnace replacement?
If your claim is approved, yes. Your insurer covers replacement costs up to your Coverage A limit, minus your deductible. On an $8,500 furnace replacement with a $500 deductible, your insurer would cover $8,000.
Does homeowners insurance cover furnace damage from a power surge?
Yes. Power surge damage is generally covered under Dwelling Coverage (Coverage A), since power surges are a covered peril under open perils policies.
What documents do I need to file a furnace insurance claim?
You’ll typically need photos of the damage, a technician’s written diagnosis, an estimate for repair or replacement, and your policy number. Filing promptly and documenting thoroughly speeds up the process.
How can I keep my furnace in good shape to avoid insurance claims?
Clean or replace air filters regularly, schedule annual professional maintenance, avoid prolonged overuse during extreme cold, use surge protectors, ensure proper installation by certified technicians, and keep ducts clear of dust and debris.
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of the policies issued, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states. Please note that statements about coverages, policy management, claims processes, Giveback, and customer support apply to policies underwritten by Lemonade Insurance Company or Metromile Insurance Company, a Lemonade company, sold by Lemonade Insurance Agency, LLC. The statements do not apply to policies underwritten by other carriers.
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