Buying old house with in-ground oil tank

Ask NJMoneyHelp

Photo: sgarton/morguefile.com

Q. Old houses generally had buried oil tanks for heating. How does a purchaser of an old house obtain liability protection against any possible contamination of property.?
— Potential homebuyer

A. You could be walking into a big pile of trouble.

It is a mistake to buy a house with an in-ground oil tank, said Brian Power, a certified financial planner with Gateway Advisory, LLC in Westfield.

“The so-called tank insurance that is commonly available frequently provides inadequate coverage if there is a real leak,” Power said. “A real leak can easily cost $100,000 to remediate.”

Power said most tank insurance policies go “up to” $100,000, and the “up to” usually winds up being way less, leaving you holding the bag. The cost to you could be hundreds of thousands if there is a substantial leak, he said.

“All tanks eventually will leak,” he said. “True oil tank insurance that covers you in the event of a leak into an underground aquifer is virtually non-existent.”

Power said homeowners insurance is also difficult to bind with an in-ground oil tank present. Even if you find it, you are likely to be dropped at any time, as most insurers have dropped, are dropping, or will soon drop this coverage, he said.

“If the sellers disclose there is an in-ground oil tank, you should have the sellers remove the tank prior to closing,” he said. “If they will not remove it, you should find another home without this very serious defect.”

Power recommends you have a tank sweep done even if the sellers disclose there is no in-ground oil tank. They may have been misled at the time they purchased the home, he said.

Email your questions to moc.p1529624366leHye1529624366noMJN1529624366@ksA1529624366.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.