Staying Comfortable: Insurance Coverage for Your HVAC System

Homeowners insurance generally covers HVAC damage caused by covered perils, which are unexpected events resulting in accidental damage. Your insurance company isn’t likely to cover any HVAC damage that occurs due to normal wear and tear or owner neglect.

To protect your home and its contents, it’s important to do regular HVAC maintenance. Otherwise, your insurer may deny any HVAC-related claims.

Homeowners Insurance: An Overview

Before you learn more about HVAC and homeowners insurance, it’s important to understand how underwriting works. Insurers use the underwriting process to determine your level of risk and calculate an appropriate premium [1]. Underwriters base their decisions on these factors.

• Age of the home: The age of your home has a big impact on your insurance premium. Older homes are more likely to develop problems, leaving them vulnerable to fires, roof leaks, and other covered events. For example, a 20-year-old roof probably isn’t as effective as a 5-year-old roof at protecting your home from the elements. Therefore, it typically costs more to insure an older home than it does to insure a new home, assuming that all other factors are equal.
• Condition of the home: Proper maintenance is essential for protecting your home against a wide range of hazards. Therefore, underwriters consider the condition of your home when calculating your premium.
• Claim history: Insurance companies have access to the Comprehensive Loss Underwriting Exchange (CLUE), a service that keeps track of your previous insurance claims [2]. During the underwriting process, your insurer gets a copy of your CLUE report to determine your risk level. If you have multiple claims on your record, you can expect to pay more for homeowners insurance than someone with no previous claims. An insurance company may even refuse to cover you based on your claims history.
• Location of the home: Some areas of the country have a much higher risk of natural disasters than other areas. For example, Florida’s coastal communities are extremely vulnerable to hurricanes and tropical storms. If you live in one of these high-risk areas, expect to pay more for your homeowners insurance.
• Availability of fire protection: Underwriters also account for fire protection when calculating your insurance premiums. If you live a mile away from a fire station, you’ll generally pay less than someone who lives 10 or 15 miles away.

Types of Homeowners Insurance Coverage

It’s also helpful to understand the types of coverage you get with your homeowners insurance policy. A standard policy typically includes dwelling coverage, contents coverage, liability coverage, and coverage for temporary living expenses.

• Dwelling coverage: Dwelling coverage pays to remove debris and replace/rebuild the primary structure of your home.
• Contents coverage: Contents are the things you keep in your home, such as furniture and electronics. This type of coverage pays to repair or replace your personal property.
• Temporary living expenses: If you have to live elsewhere while your home is repaired or rebuilt, your insurance company may cover your temporary living expenses.
• Liability coverage: Liability protects you in the event that someone is injured on your property. For example, if a visitor falls and breaks their leg, they may sue you for their medical expenses.

Common Types of HVAC Damage

Damage to a built-in HVAC unit typically falls under your dwelling coverage. If you have any portable units, such as a window air conditioner, they’re likely to fall under the contents portion of your policy.

Types of Covered Perils

When you buy homeowners insurance, it’s important to read your policy carefully. Some policies come with coverage for open perils, while others only cover named perils. “Open peril” means that your insurer is likely to cover any peril that’s not specifically excluded by the policy. In contrast, “named peril” coverage only covers you for items listed in the policy.

The type of coverage you have has a big impact on HVAC and homeowners insurance coverage. For example, if you have an open-peril policy, your insurance company may pay for HVAC damage caused by fires, falling objects, hailstorms, or high winds. If you have named-peril coverage, your insurer will only cover HVAC damage caused by a peril listed in your policy.

Where you live has a big impact on what’s covered by your policy. For example, some regions are more prone to natural disasters than others, which influences the type of coverage available. Therefore, it’s important to review your policy carefully to ensure your HVAC claim won’t be denied if it’s caused by a non-covered event.

Additionally, if you upgrade your HVAC system, you may need to increase your coverage limits to account for the increased value of your home.

Examples of HVAC Damage Caused by Covered Perils

Depending on the type of policy you have, your insurer may pay for the following.

• Fire damage: Fires produce intense heat, which may cause some of the components of your HVAC system to melt. It’s also possible for HVAC damage to occur when firefighters use hose water or chemicals to inhibit flames.
• Falling objects: If you have a central air conditioning system, it’s possible for a tree to fall on the compressor during a severe storm. Your outdoor HVAC components may also be damaged when high winds pick up large objects and hurl them through the air.
• Hailstorms: Any HVAC component that sits outside is vulnerable to the effects of hail. Even small hailstones pack a big punch, so it’s possible for hail to bend the coils in your A/C compressor or cause other types of damage.

Note that standard homeowners insurance policies don’t cover flooding. If you’re concerned about the risk of flooding in your area, consider purchasing a separate flood insurance policy. You can purchase one from the National Flood Insurance Program or buy from a private insurance provider [3].

HVAC and Homeowners Insurance: The Effect of System Upgrades

As noted previously, the condition of your home has a big impact on the cost of your homeowners insurance. If you make any HVAC upgrades, you may have to pay more for coverage, as many upgrades increase the value of your home. For example, switching from basic window air conditioners to a central A/C system makes your home more comfortable, increasing its value.

Homeowners insurance advisor Kristopher Kane emphasizes the benefits of HVAC coverage. “It’s about much more than just comfort. If your HVAC system fails in the middle of a cold snap, you could end up with pipes that freeze and burst, which can cause significant and expensive damage. Having adequate coverage should allow you to remedy any emergency situations like this as quickly as possible.”

Navigating the Claims Process

If you need to file a claim for HVAC-related damage, follow these steps:

1. Report the damage immediately.
2. Provide supporting documentation, such as photos of your damaged furnace or video footage of high winds damaging your outdoor A/C compressor.
3. Keep in contact with your insurance adjuster. Good communication is essential for avoiding delays in the claims process.
4. Find a qualified contractor to make necessary repairs. Before hiring someone to work on your HVAC system, make sure they’re licensed and carry insurance.
5. Decide whether to accept or reject your insurer’s initial offer. In some cases, the first offer you get isn’t enough to cover your expenses. If you decide to negotiate, back up your claim with multiple estimates from reputable companies.
6. Use the insurance money to pay for needed repairs.

Before you file a claim, make sure you understand the difference between actual cash value and replacement cost value. ACV is the cost of repairing or replacing damaged property after you account for depreciation. In contrast, RCV is the cost of repairing or replacing damaged property without any consideration for depreciation.

Over time, your home and its contents may lose value due to wear and tear. Depreciation is the technical term for this loss of value. If your policy only covers the actual cash value of damaged or destroyed property, your insurance company won’t reimburse you for the full cost of the repairs.

Tips for Preventing HVAC Issues

Although your homeowners insurance may cover HVAC damage, it’s important to perform regular maintenance. You may be able to prevent HVAC damage and avoid having to file a claim that goes on your insurance record. Here are a few tips to help you minimize your losses:

• Have a professional inspect your HVAC system before you turn on the furnace each winter.
• Replace your HVAC filters regularly.
• Make repairs as soon as you become aware of a problem with your HVAC system. If you ignore HVAC issues, your insurer may not cover any resulting damage.
• Follow the manufacturer’s instructions regarding system operation.
• Make sure your conditioner is the right size for your living space. If it’s too small, it must work harder to cool each room, leading to premature wear.

Review Your Policy Regularly

Preventive measures may help you avoid expensive HVAC damage, but you can’t control everything. Review your policy regularly to make sure you understand what it covers. If you make any changes to your home, you may need to update your coverage accordingly. Otherwise, you may not have enough insurance to meet your needs.

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Reviewed by Kristopher Kane

Kristopher Kane is a career freelance writer with over 15 years of experience and a broad portfolio encompassing various topics within the insurance industry. He has written for both B2B communication and consumer-level customer engagement.