Guides
Appliance and HVAC breakdown: insurance or warranty?
Homeowners insurance excludes a furnace or dishwasher that simply fails but pays for the water, fire or smoke damage it causes. Who pays for what.
When an appliance or HVAC system stops working because it wore out or malfunctioned, your homeowners policy generally does not pay to fix or replace it. The ISO HO-3 excludes wear and tear and mechanical breakdown. When the failure damages something else, such as a ceiling soaked by an overflowing air conditioner or a room blackened by a furnace puffback, the policy usually covers that damage. A manufacturer's warranty, a home warranty or an equipment breakdown endorsement is what pays for the failed machine itself.
What the HO-3 says about breakdown
In the ISO HO 00 03 05 11 form, the dwelling coverages exclude loss caused by "wear and tear, marring, deterioration" and by "mechanical breakdown, latent defect, inherent vice or any quality in property that causes it to damage or destroy itself," along with "rust or other corrosion." A furnace is part of the dwelling, so Coverage A (dwelling) is where that applies. Freestanding appliances fall under personal property, where the named perils apply, and the breakdown logic is the same either way.
Then comes the exception that does the work. Unless the loss is otherwise excluded, the form covers loss to the building from "accidental discharge or overflow of water or steam" from a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or a household appliance, on the premises. It includes the cost to tear out and replace part of the building when needed to repair the system. It also states: "We do not cover loss to the system or appliance from which this water or steam escaped." The leak damage is covered; the machine that leaked is not.
Your own policy may use a different edition or add a seepage exclusion that treats slow leaks differently. See sudden vs gradual water damage: where insurers draw the line and ISO homeowners forms and why your policy may differ.
Who pays, event by event
These outcomes follow the standard wording and are examples, not promises. Your policy, endorsements and state law control.
| What happened (hypothetical) | Failed unit | Resulting damage |
|---|---|---|
| Furnace blower motor burns out at the end of its life | Not covered; wear and tear and mechanical breakdown | None |
| Dishwasher supply hose bursts and floods the kitchen | Not covered | Floor, cabinets and drywall generally covered, less your deductible |
| Air conditioner condensate line clogs and overflows into the ceiling | Not covered | Ceiling and contents damage generally covered |
| Water heater tank corrodes through and floods the utility room | Not covered; corrosion | Water damage to the building generally covered |
| Furnace puffback coats the house in soot | Furnace repair not covered | Smoke and soot damage generally covered; the form's smoke peril names puffback from a furnace |
| Lightning strikes and destroys the air conditioner's compressor | Covered; lightning is not an excluded cause | The unit itself is covered |
| Dryer fire destroys the dryer and scorches the wall | Covered; fire | Covered |
| Refrigerator compressor dies and the food spoils | Not covered | Food spoilage is not covered unless you added it; see food spoilage and power outage coverage |
| Utility power surge damages a control board | Depends on the form and the insurer | See lightning and power surge damage |
Surge damage has a catch. In the HO-3, the covered peril for sudden and accidental electrical damage applies to personal property and expressly excludes "tubes, transistors, electronic components or circuitry that is a part of appliances, fixtures, computers, home entertainment units." That is why a surge that fries an electronic board is argued over, while a lightning strike generally is not. For the details, see the surge guide.
Appliances are paid at actual cash value
Even when an appliance loss is covered, the HO-3 settles "awnings, carpeting, household appliances, outdoor antennas and outdoor equipment" at actual cash value, not replacement cost, whether or not they are attached to the building. That applies even if your dwelling coverage pays replacement cost. Say the adjuster depreciates a $1,800 range by 50% after a kitchen fire (hypothetical): the check is $900 before your deductible. A personal property replacement cost endorsement can change this for contents; check your declarations page. See actual cash value and replacement cost vs actual cash value: why it matters.
Three things that fill the gap
Manufacturer warranty. The first question for a newer appliance is whether it is still within the maker's warranty. Check the paperwork and the serial number before anything else; a covered part may cost you nothing.
Equipment breakdown endorsement. Many insurers sell an add-on that covers sudden mechanical or electrical breakdown of home systems and appliances. Names and limits differ by insurer (equipment breakdown, home systems protection and similar), and it may be included in some policies. It is real insurance regulated by your state insurance department, so a claim follows the policy's rules. Read the covered-equipment list, the age or condition limits, whether the deductible is separate, and whether wear-related failures are paid. See equipment breakdown coverage: what it pays and who needs it.
Home warranty. A service contract that pays technicians to repair or replace covered items, with a fee per visit and caps. It is a different product with different exclusions, covered in homeowners insurance vs a home warranty: what each one pays for. The ISO homeowners form includes an "Other Insurance And Service Agreement" condition: where a loss is also covered by a service agreement, which the form defines to include a home warranty, the homeowners policy is excess over any amount the agreement pays.
Is a claim worth filing
Appliance repairs often cost less than a typical deductible, which settles the question for the machine. Water damage is different. Say a dishwasher hose bursts and the repair estimate is $6,500 with a $1,000 deductible (hypothetical): the policy pays about $5,500 for the building damage, and the dishwasher is yours. Whether to file depends on the full cost and on how a claim affects renewal; the Should I file a homeowners claim? and the guide should you file a homeowners claim? explain the trade-off. After a covered water release, the HO-3 also pays the reasonable cost of necessary measures to protect the property from further damage, so stop the water at the shutoff and keep receipts (see reasonable repairs: what you can fix before the adjuster comes).
When something breaks: a short sequence
- Make it safe. Shut off the water, gas or power to the failed unit.
- Get a written diagnosis. Ask the technician to state the cause. A report that says "compressor failed from age" and one that says "lightning damage to the control board" lead to different answers.
- Keep the failed part and take photos before anything is thrown away. An adjuster may want to inspect it.
- Check warranties first, then your declarations page for an equipment breakdown or similar endorsement.
- Separate the damage. Price the machine and the resulting damage separately, then compare each against your deductible.
- Report promptly if resulting damage is significant. Late notice and delay in drying out a structure create new problems; see the first 48 hours after damage to your home.
Maintenance matters on both sides
Both insurers and warranty companies deny breakdowns they trace to neglect. A furnace that has gone unserviced for a decade, a clogged condensate line or a washer hose left in place long past its replacement date can lead to a denial or a fight. Keep service invoices, filter-change records and installation dates. The upkeep that protects your claims is also the upkeep that keeps you insurable; see home maintenance that keeps you insurable.
Key takeaways
- The HO-3 excludes breakdown from wear and tear, mechanical failure and corrosion, so a failed furnace or dishwasher is usually your cost.
- Resulting water, smoke or fire damage is generally covered, though the system that caused it is not.
- Covered appliance losses are settled at actual cash value under the standard form, even where your dwelling coverage is replacement cost.
- Surge damage to electronic circuitry is treated differently from lightning damage, so confirm how your form handles it.
- Check manufacturer warranties, an equipment breakdown endorsement and any home warranty before assuming nothing pays.