Does Homeowners Insurance Cover Furnace Replacement?

Homeowners insurance covers furnace replacement only in specific situations. When your furnace is damaged or destroyed by a covered peril, like fire, lightning or a burst pipe, your policy's dwelling coverage pays for repairs or replacement, subject to your deductible and coverage limits. Still, insurance won't cover breakdowns due to wear and tear, poor maintenance or age.

Homeowners insurance doesn't cover furnace damage from preventable, intentional issues or those outside the insurer's responsibility. Understanding what isn't covered helps you maintain your furnace properly and file legitimate claims.

Equipment breakdown coverage is a home insurance add-on that pays to repair or replace appliances and systems, like your furnace, when they fail due to internal mechanical or electrical issues.

Although standard homeowners insurance only covers furnace damage from external perils like fire or lightning, equipment breakdown coverage covers when the unit shorts out, overheats or suffers a motor failure. This coverage helps if your furnace stops working due to a sudden internal breakdown that isn't caused by a covered peril or neglect.

Providers like American Family and Auto-Owners offer equipment breakdown coverage, ensuring major home systems like your furnace are covered.

Both equipment breakdown coverage and home warranties cover unexpected furnace repairs, but they offer different types of protection. One is an affordable insurance add-on, while the other is a standalone service contract with broader, more costly coverage. They compare this way for furnace protection:

Sometimes, building codes may have changed since your furnace was installed. Ordinance or law coverage, an optional part of homeowners insurance, helps pay for upgrades needed to meet current codes. 

For example, if your furnace room now requires additional ventilation or a different type of exhaust system under new safety regulations, the added cost isn't covered under standard dwelling coverage. Homeowners in older houses or areas with frequent code updates should add this protection.

Filing a homeowners insurance claim for furnace damage requires documentation and clear communication with your insurer. Here's how the process works.

Filing a furnace claim isn't always the smartest move, especially when repair costs are low. If your deductible is $1,000 and the repair bill comes to $1,200, insurance covers only $200 after you pay out of pocket. The small payout isn't worth the hassle or risk of higher premiums later.

But if your furnace is damaged beyond repair and replacement costs $7,500, filing a claim makes sense. With the same $1,000 deductible, your insurer covers $6,500 of the bill. Compare the estimated repair or replacement cost against your deductible before deciding whether to file.

If your furnace is damaged by a covered peril and needs replacement, you can keep the same type of system or upgrade to something different, such as a heat pump. Most insurers pay only for a comparable replacement, so they won't cover a full upgrade.

If you install a new type of heating system, your insurer pays what it would have cost to replace the original furnace. You cover the remaining balance yourself.

Regular furnace maintenance ensures longevity and efficiency. Keep your furnace in top condition with these steps:

Change Filters Regularly: Replace or clean the furnace filter every three months or more often if you have pets or a dusty environment. Clean filters keep airflow unobstructed and reduce strain on the furnace.

• Schedule Professional Inspections: A qualified technician should inspect and service your furnace once a year to identify issues before they become major problems.
• Keep the Area Clear: Remove debris, dust and flammable materials from around your furnace to reduce fire risks and improve efficiency.
• Test the Thermostat: Check and calibrate your thermostat to ensure it functions correctly and efficiently controls your furnace.
• Inspect Venting Systems: Check the venting system for blockages, leaks or corrosion. Proper venting protects your safety and furnace performance.
• Watch for Warning Signs: Strange noises or odors from the furnace signal potential problems that need attention.
• Know Your System: Understand how your furnace works, its model and specific maintenance needs. This knowledge helps when troubleshooting or discussing issues with professionals.

Regular upkeep extends the life of your furnace and helps you avoid unexpected breakdowns that insurance won't cover.

Homeowners insurance covers furnace replacement only when a covered peril causes the damage, not for age, neglect or gradual breakdowns. Keep your furnace well-maintained and understand your policy limits. Consider equipment breakdown coverage or a home warranty for mechanical failures, and compare quotes from multiple insurers to find the best rates and coverage.

Your furnace is a built-in appliance covered by homeowners insurance. Common questions about furnace coverage:

MoneyGeek analyzed quotes from multiple insurance providers across the U.S. using an average homeowner profile. We considered different locations and companies to provide reliable cost estimates and demonstrate why comparing rates is important.

Homeowner Profile

We created a sample homeowner profile with these characteristics:

• Good credit score (769 to 792)
• Home constructed in 2000
• Wood-frame construction
• Composite shingle roof

Homeowners Insurance Coverage Details

Unless otherwise specified, we used these coverage limits to collect quotes for our comparison:

• $250,000 in dwelling coverage
• $125,000 in personal property coverage
• $200,000 in personal liability coverage
• $1,000 deductible

We also compiled data for policies with broader coverage to determine the best companies for insuring expensive homes, increasing limits to $1 million in dwelling coverage, $500,000 in personal property coverage and $1 million in liability coverage.