Oil Tank Insurance: Protect Yourself from a Defective Tank Disaster

Many organizations that store fuel oil use large tanks — sometimes buried underground — for heating, operations, or fuel storage. Tanks can corrode or get damaged over time, causing leaks or catastrophic failures. In such cases, the pollution of soil and groundwater, costly cleanup, regulatory fines, damage to property, liability towards third parties, project delays, and reputational harm are among the consequences that can be disastrous. Pollution or environmental damage caused by leaking oil tanks is usually excluded from traditional commercial general liability policies. This means that businesses and property owners are taking the risk of suffering the total cost of the incident.

That is where oil tank insurance becomes critical. For clients in Houston and the broader Texas region—especially those operating in high-risk sectors such as oil & gas, manufacturing, construction, transportation, or property development—obtaining customized oil tank insurance is viewed as a sign of strong risk management and regulatory compliance. Many businesses also pair this coverage with transportation insurance to protect against risks associated with hauling fuel, oil, or hazardous materials across Texas.

What is Oil Tank Insurance?

Oil tank insurance is a business insurance policy that secures the company from losing money due to defective or leaking oil tanks. It insures the tanks that are above ground and below ground (USTs) and may also include the following:

• Remediation costs: Soil examination, disposing of the polluted material, and tanks getting dismounted.
• Third-party liability: Property damage or bodily injury caused by leaks
• Regulatory compliance: Verifying that coverage meets Texas Commission on Environmental Quality (TCEQ) standards
• Custom limits: Adjusted for the number of tanks, throughput, and operational risk

For companies, this coverage serves as a critical risk management tool, protecting both balance sheets and operational continuity. Because such events pose risks far beyond routine property damage — including environmental liability and regulatory exposure — standard commercial general liability policies usually do not suffice. 

For operators in Texas (oil & gas operations, fuel distributors, industrial complexes), underground oil tank insurance is often the most appropriate “financial assurance” mechanism accepted by regulators. 

How Does Fuel Oil Tank Insurance Work?

A commercial oil tank policy functions as financial assurance for businesses, guaranteeing funds are available for cleanup, liability, and remediation if a tank fails:

• Cleanup coverage: Remediation of soil, groundwater, and removal of defective tanks
• Third-party protection: Liability coverage for affected neighbors or adjacent properties
• Regulatory compliance: Meets financial assurance requirements for USTs under Texas law
• Tailored limits: Policies can be customized to business size, number of tanks, and industry-specific risks

The business operations are maintained without any interruptions as a result of financial risk being reduced through insurance for B2B clients. In addition, property transactions, acquiring loans, and receiving project approvals all become less complicated and smoother thanks to insurance.

Is Heating Oil Tank Insurance Required?

Whether oil tank insurance coverage is legally required depends on the jurisdiction and regulatory rules. In Texas, if you operate an underground petroleum storage tank system, you must demonstrate “financial assurance” for corrective action and third‑party pollution liability — and insurance is the most common and acceptable method. 

For many commercial and industrial operations in the oil & gas sector, environmental regulations make this a compliance issue — not just a risk‑management choice. As a regulated operator, failing to maintain valid insurance (or another accepted financial assurance mechanism) may violate relevant state rules. 

Benefits of Oil Tank Insurance

Here are the top benefits for businesses opting for coverage:

• The protection of finances against cleaning, remediation, and liability — it keeps away costs that can exceed $100,000 to $1,000,000 out of pocket in the event of a spill or leak.
• Peace of mind for property transactions — ownership of a properly insured or decommissioned oil tank simplifies property sales and avoids surprises during inspections or due diligence. 
• Compliance with regulations — for any industrial or commercial activity in Houston/Texas, that uses underground storage tanks, insurance is deemed to meet TCEQ regulations regarding financial assurance.
• Third parties and neighbors protection — it is not unusual that leaks spread to adjacent properties (via soil, groundwater, shared wells, or water courses), and insurance can cover the costs of liability or cleanup on nearby or public land.
• Adjustable and customized coverage — insurers are capable of setting coverage limits, remediation limits, occurrence, and aggregate limits that are in accordance with your unique tank usage, throughput, and risk profile.

The personalized insurance, which is not limited to the oil & gas, manufacturing, commercial real estate, and construction industries, is in correspondence with their overall risk management and compliance strategy.

Do I Need Oil Tank Insurance?

You should consider it seriously if:

• You own or operate fuel oil storage tanks, especially underground or in-ground tanks.
• Your operation involves fuel storage, heating oil, or petroleum products — common in industrial, oil/gas, or commercial settings.
• You face regulatory requirements (for example, under TCEQ in Texas) to provide financial assurance for USTs.
• You want to avoid the high cost of cleanup, soil remediation, tank removal, or third‑party liability if a leak occurs.
• You plan to sell or transfer property, as potential buyers and lenders often require proof of a clean environmental history or insurance protection.

For companies in high-risk industries, oil tank insurance becomes an essential line of defense, not an optional add-on.

Consequences of Not Having Oil Tank Insurance

Oil tanks bring significant environmental and financial risks. A single leak in Texas can trigger costly cleanups, regulatory penalties, and major disruptions to business operations. Without adequate tank insurance  or broader protections like gas station insurance operators are forced to shoulder all liabilities on their own. This includes risks tied to environmental compliance, property damage, and delays or complications during real estate transactions.

• Risk of unlimited financial liability — in the event of a leak, you may have to pay for cleanup, restoring the area, disposing of the tank, testing the soil, replenishing the groundwater, and possibly facing civil lawsuits from nearby residents or others. The prices can easily reach tens or even hundreds of thousands of dollars.
• Regulatory penalties or non‑compliance — for UST owners/operators in Texas, failing to maintain an acceptable financial assurance mechanism can lead to violations under environmental regulations.
• Difficulties when selling or financing a property — prospective buyers or lenders may turn down the deal or require the removal of the tank or the conduct of the environmental assessments, thus postponing the transactions or taking a part of the value of the property away.
• Environmental liability and reputational damage — the pollution of the ground or the aquifer can cause a situation of long-term environmental damage, health hazards, and legal liabilities, thus not only the company’s finances but also the community relations will be affected.
• Standard insurance gaps — general liability or homeowners policies usually do not cover pollution or environmental claims, and this leaves huge exposures without any protection.

How TWFG Khan Insurance Services Helps — Tailored Oil & Gas Insurance Coverage

TWFG Khan provides customized, B2B-focused oil tank insurance solutions for high-risk industries in Houston and across Texas:

• Rapid quotes and swift issuance of Certificates of Insurance (COI) to help clients meet regulatory deadlines.
• Customized policy design to cover tank leak, spill, cleanup, and pollution liability risks — beyond what a standard commercial general liability policy offers.
• Coverage limits and terms tailored to the number of tanks, throughput, and client risk profile.
• Guidance on compliance with state regulations to ensure financial assurance requirements are met.
• Strong relationships with top-rated carriers offering pollution liability insurance, backed by high customer ratings and fast claims response.

Whether you operate an oilfield service company, a manufacturing plant, a commercial property, or an industrial facility, we help you manage the latent risk from fuel oil storage systems.

Why TWFG Khan Insurance Services Is an Ideal Partner

TWFG Khan Insurance Services understands what today’s oil and gas environment demands. We offer:

• Expertise in high-risk energy operations and compliance requirements
• Access to specialty markets for pollution liability, well control, excess liability, and excess layers
• Guidance on asset valuation documentation and risk engineering compliance
• Support for small, mid-size, and large operators across the oil and gas value chain

With our local presence in Texas and deep industry knowledge, we help clients stay ahead of market shifts, secure strong coverage, and manage risk with confidence.

If your operations involve drilling, production, pipeline transport, midstream, or logistics, contact TWFG Khan Insurance at 713-388-6681 or request a quote online today and ensure your business is prepared for whatever comes next.

Frequently Asked Questions (FAQ)

Q1. What Is the Difference Between “Oil Tank Insurance,” “Underground Oil Tank Insurance,” and “In-Ground Oil Tank Insurance”?

They all refer to the same general idea: insurance coverage for fuel oil storage tanks. “Underground” or “in‑ground” emphasises that the tank is buried, which raises the risk of soil/groundwater contamination. Because underground tanks pose higher environmental and liability risks, insurance policies may cost more or require more extensive remediation coverage.

Q2. Does Standard Commercial or Property Insurance Cover Oil Tank Leaks and Spills?

Usually not. Most general liability or property policies exclude pollution events, gradual corrosion, or leaks arising from fuel oil tanks. That is why a dedicated oil tank (or pollution liability) policy is needed. 

Q3. Are There Regulatory Obligations for Tank Owners in Texas To Carry Insurance?

Yes. Owners/operators of underground storage tanks (USTs) in Texas must show financial assurance for corrective action and third‑party liability under rules from the regulatory authority. Insurance is the most common mechanism to meet that requirement. 

Q4. What Happens if a Tank Leaks and I Have No Insurance?

In that case, you would probably have to shoulder the full burden of the leak: all required soil and groundwater cleaning, tank disconnection, heavy restoration, liability for the destruction of nearby properties, fines from authorities, and maybe even the reduction of your property value. The costs for cleaning can be astronomical, and the usual insurance will most likely not include them.

Q5. Does the Insurance Cover Cleanup and Soil Remediation?

Yes — a properly structured oil tank insurance policy can cover tank removal, soil testing, remediation, backfilling, disposal of contaminated material, and associated labor costs. 

Sameer Khan

Sameer Khan is the Brand Director of TWFG Khan Insurance, a leading commercial insurance agency in Houston, Texas. With over 20 years of experience, he specializes in risk management solutions for diverse industries, offering tailored insurance programs that ensure protection and peace of mind for businesses and professionals.