Heat pump owners face high bills because one in four household contents insurance policies do not cover them
- Home emergency insurance covers the costs of urgent repairs, for example to boilers
- But a quarter of these deals do not cover heat pumps, only gas central heating
- To make matters worse, many policy formulations are so vague that they are impossible to say
More homeowners swapping gas boilers for heat pumps are finding their insurance doesn’t cover emergency repairs – leaving many with bills running into thousands of pounds.
The issue concerns home emergency insurance, which pays for quick solutions to urgent problems such as leaky central heating systems or gas pipes.
However, many home emergency insurance policies only cover gas central heating – meaning they exclude electrical alternatives such as heat pumps.
Making matters worse, many home emergency policies are so vague that consumers cannot tell whether or not they are covered for their heat pumps. In response, some homeowners had to turn to the Financial Ombudsman Service (FOS) – and won.
Get the information: Geothermal heat pumps are the most expensive to install and convert geothermal energy into electrical energy for your home
Additionally, the number of heat pumps is growing as homeowners replace their gas boilers with government grants from the Boiler Upgrade Scheme worth up to £6,000 per home. Prime Minister Rishi Sunak yesterday unveiled plans to increase the amount to £7,500.
Financial data expert Defaqto said 24 percent of home emergency insurance policies do not cover electric central heating systems such as heat pumps.
However, the actual number is likely to be higher because the wording of many of these products is unclear and it is difficult to say whether heat pumps are covered or not.
Angela Pilley, home insurance expert at Defaqto, said: “It is not currently clear in all policy wording whether geothermal heat pumps fall within the definition of an ‘electric heating system’, so one should definitely not assume that this is the case.”
“If a consumer wants to change or upgrade their heating system, it is important that they check with their home emergency provider to see if there is coverage for this type of heating system.”
How does home emergency insurance differ from home contents insurance?
Home emergency insurance covers the costs of urgent repairs to the house and the costs of quickly dispatching a tradesman and alternative accommodation if they have to move out.
From this point on, household contents insurance takes over.
For example, if a homeowner’s water pipes burst, home emergency insurance will cover the cost of repairs. However, home contents insurance would replace the value of lost items.
“We are seeing policy wording evolving to more clearly include or exclude these modern heating systems. However, as this is not yet the case for all providers, consumers need to double check to be sure.”
Homeowners contact the ombudsman
In one case, a man with an air source heat pump bought home emergency insurance for £49.99 a year.
When his heating and hot water failed, the homeowner, Mr. H., made a claim on the policy. But when an engineer arrived, he was told that the tradesman would not be carrying out work on electrical heating systems – and that his policy would not cover it either.
Mr H’s household included small children and an elderly relative with a heart condition – all without heat or hot water before Christmas and New Year.
The homeowner desperately tried to find a part to repair his heat pump but was told he would have to wait five months, leaving him with no choice but to have a completely new boiler fitted, which cost him £9,000.
He then turned to the FOS. The Ombudsman said: “It is our approach – and our approach reflects the law – that where a term in an insurance contract is not clear, it should be construed in favor of the policyholder.”
“Based on what I’ve seen so far, I don’t think so [the broker] made it clear in Mr. H’s insurance documents that his air source heat pump was not covered by his management home emergency insurance policy. And that means I don’t think [the broker] treated Mr H. fairly by rejecting his claim.’
How do heat pumps work?
There are two types of heat pumps.
Air source heat pumps convert outside air into water, which heats your home via radiators or underfloor heating.
Geothermal heat pumps transfer heat from the ground to the outside to heat your home.
Of the two, inground air pumps are the most expensive to install and require more outdoor space.
The FOS ordered the firm to pay Mr H £300 in compensation and an additional £750 – the maximum his home emergency contract would pay out.
In another example, an air source heat pump owned by a woman named Miss K broke in November 2022.
She filed a claim with her home emergency insurer, QIC Europe, for the broken item – a condenser fan motor.
However, QIC rejected the claim, saying the deal did not involve electrical components.
But the FOS sided with the homeowner and said the wording of the directive did not actually exclude heat pumps. The Ombudsman said: “It describes itself as covering the ‘heating system’ in the home, which is broader than just traditional boilers and other systems.”
“QIC had the opportunity to include clarifications or exclusions in its wording to ensure that only conventional boilers were covered if it wished to do so. This is not the case and the wording states that the heating system is covered. I do not accept that any of the exclusions set out in the policy apply.
The FOS ordered One Insurance to pay Miss K £300 – the maximum the policy would have paid out if the claim had been accepted.
QIC declined to comment.