Topics on this page
- Why Do You Need Homeowners Insurance?
- Types of Homeowners Insurance Policies
- What Homeowners Insurance Covers
- Additional and Optional Coverages
- Obtaining a Policy
- Notices to Which Consumers Are Entitled
- Obligations Following A Loss
- Cancellations and Nonrenewals
- Filing A Complaint Against Your Insurance Company
Why Do You Need Homeowners Insurance?
Purchasing homeowners insurance helps you recover your financial losses from perils covered by your policy, such as fire, theft, storm or other disaster. A homeowners policy also can protect you against lawsuits and other liability claims made against you or your family members for bodily injury or property damage caused to other people.
Maryland doesn't require homeowners insurance by law, but if you finance your home, your mortgage lender may require you to have a homeowners insurance policy in place. Renters and condominium unit owners should also consider purchasing insurance.
Types of Homeowners Insurance Policies
Homeowners insurance policies vary according to the types of property they are designed to cover. Policies may be of the “named perils” type (coverage for specifically named perils such as fire, windstorm, hail, vandalism, theft, etc.) or of the “open perils” type, also called “all risk” coverage (coverage for all causes of loss unless the cause of loss is specifically excluded), or a combination of both.
If you are considering purchasing a named-perils policy, be sure that you understand the type of coverage it provides. If your property is damaged due to a peril not specifically listed in a named-perils policy, your insurer will not pay for the damage. An open-perils policy provides coverage for all causes of property loss, whether named or unnamed, unless there is a specific exclusion stated in the policy. The open-perils policy typically provides more protection than a named-peril policy, as it tends to cover more causes of loss. An open-perils policy may have a higher premium.
Homeowners policies may have different names depending on the insurance company that sells them. Standard homeowners insurance policies are often referred to as:
- HO-2 Broad Form (named peril)
- HO-3 Special Form (open peril and named peril)
- HO-4 Renters Insurance
- HO-6 Condominium Unit Owners
- HO-8 Modified Named Perils Form (usually for older homes)
What Homeowners Insurance Covers
Homeowners insurance covers both damage to the policyholder’s property as well as liability or legal responsibility for injuries policyholders or their families cause or are alleged to have caused to other people.
A standard homeowners insurance policy usually includes:
Coverage for the structure of your home
The policy pays to repair or rebuild a home if it is damaged or destroyed by a covered peril. Most standard policies also cover structures that are not attached to a house such as a garage, tool shed or gazebo. Trees, plants and shrubs are also covered subject to certain limitations.
Depending on the terms of the policy, property damage claims may be paid on the basis of:
- “actual cash value” (the cost to rebuild or replace the home or possessions minus a deduction for depreciation);
- “replacement cost” (the cost to replace or repair the home or possessions without a deduction for depreciation); or
- guaranteed/extended replacement cost (the cost to rebuild or replace the home or possessions to the same condition they were in before the disaster, even if it exceeds the policy limit).
Under Maryland law, if a policy provides coverage on a replacement cost basis, the insurer must permit the policyholder to file a claim for the difference between the actual cash value and the replacement cost for completed repairs or replacement for up to two years after the date of loss.
Read the Law: Md. Code, Insurance § 19-213
Coverage for personal belongings
The policy covers personal property, such as furniture, clothes and other personal items, that are stolen or damaged or destroyed by a covered peril. Depending on the policy’s terms, personal property coverage can be limited to an amount equal to 50 to 70 percent of insurance on the structure of a home. Personal property may be covered anywhere in the world if the policy provides “off premises” coverage.
A standard homeowners policy provides coverage against lawsuits or other liability claims for bodily injury or property damage that policyholders, family members or pets cause or are alleged to have caused to other people. Depending on the policy’s terms, liability coverage may extend beyond the home to anywhere in the world. The policy pays for both the cost of defending the policyholder in court, and any court judgments or settlements, up to the dollar limits of the policy. A homeowner may also purchase umbrella or excess liability policies, which provide higher liability limits and may provide broader coverage.
Coverage for additional living expenses
A standard homeowners policy pays the additional costs of living away from home if a house is inhabitable due to covered loss or damage. The policy may cover hotel bills, restaurant meals and other living expenses incurred while the home is being rebuilt. Maryland insurers covering additional living expenses must provide a minimum of 12 months coverage.
Read the Law: Md. Code, Insurance § 19-208
Additional and Optional Coverages
Insurers must provide an applicant, at the time of application for homeowner's insurance, with a written statement that lists all additional optional coverage available from the insurer.
Read the Law: Md. Code, Insurance § 19-207
Flood and Earthquake
Standard homeowners policies do not cover flooding, earthquakes, or mudslides. Flood and earthquake insurance may be available as an endorsement to your policy, or as a separate policy. While some insurers offer flood policies, flood insurance can also be purchased from the National Flood Insurance Program (NFIP). For more information go to the NFIP’s website.
Sewer or Drain Backup
At the time of initial application and at each renewal, insurers are required by law to offer you the option of purchasing coverage for water that backs up through sewers or drains.
Read the Law: Md. Code, Insurance § 19-202
Not all homeowners policies provide coverage for mold damage. Some policies exclude all coverage for any type of mold damage or liability arising out of mold. Some policies provide coverage if mold is caused by a covered peril. You may wish to purchase a policy that contains mold coverage.
Jewelry and Valuable Items
Expensive items like jewelry, furs and silverware are covered, but there may be dollar limits on coverage. To insure these items to their full value, individuals can purchase an endorsement or separate policy.
Family Day Care Providers
Insurers are required by law to offer licensed family day-care providers liability coverage of at least $300,000 for liability that results from bodily injury, property damage, or personal injury arising out of an insured’s activities as a family daycare provider.
Read the Law: Md. Code, Insurance § 19-203
The Maryland Condominium Act requires a condominium association to purchase a master insurance policy that provides primary coverage for losses to the common areas, the actual structure, and the individual units, exclusive of the improvements and betterments made to the unit after the unit was transferred from the developer to the first owner. The condominium association is primarily responsible for making repairs in the event of a casualty loss, and the bulk of insurance protection is provided by a master policy purchased by the condominium association. Individual unit owners also may purchase coverage to provide protection for their personal property.
Read the Law: Md. Code, Real Property § 11-114
Obtaining a Policy
When you apply for a policy, the insurance company may consider a number of factors such as the number of prior claims you have made. However, the following factors cannot be considered:
An insurer may not refuse to underwrite insurance for a reason based wholly or partly on race, color, creed, sex, or blindness of an applicant or for any arbitrary, capricious, or unfairly discriminatory reason.
Read the Law: Md. Code, Insurance § 27-501(a)
Prior claims more than 3 years old
A homeowners insurer may not refuse to underwrite a homeowners policy, or cancel or nonrenew a policy because the applicant or policyholder made a claim that occurred more than 3 years before the date of the application.
Read the Law: Md. Code, Insurance § 27-501(d)(2)
Insurers may not refuse to underwrite homeowners insurance because of your credit history and may not use your credit history when pricing a policy.
Read the Law: Md. Code, Insurance § 27-501(e)
Insurers may not refuse to underwrite a homeowners policy, increase your premium, or cancel or nonrenew your policy if you or your producer, on your behalf, makes an inquiry about a claim and the inquiry does not result in payment of a claim.
Read the Law: Md. Code, Insurance § 27-501(p)
Victims of crimes of violence
Insurers may not use an individual’s status as a victim of a crime of violence as the sole basis to cancel, nonrenew, refuse to issue a policy, refuse to pay a homeowners insurance claim, increase a premium, add a surcharge, remove a discount or take any other adverse action.
Read the Law: Md. Code, Insurance § 27-504.1
Insurers may review your loss history and the loss history of the property itself. Under the Fair Credit Reporting Act, you are entitled to request a free loss history report (called a C.L.U.E. report) every 12 months, by visiting the Lexis Nexis Risk Solutions website. If you find information in your report that you believe is inaccurate, you have the legal right to dispute the report’s content and to obtain an investigation of your dispute.
If you have been turned down by one insurer for homeowners insurance, you may try obtaining coverage through another insurer. If you are unable to obtain insurance for your home from a private insurer, essential insurance coverage may be available through the Maryland Joint Insurance Association (MDJIA). The MDJIA is authorized by the Maryland Property Insurance Availability Act. Read the Law: Md. Code Ins. § 25-401 et seq.
Read the Law: Md. Code, Insurance Title 25 Subtitle 4
Notices to Which Consumers Are Entitled
Maryland law requires insurance companies to provide certain notices to policyholders and applicants, including:
Annual Summary of Coverages and Exclusions
You are entitled to receive an annual statement that summarizes the coverages and exclusions under your homeowners insurance policy.
Read the Law: Md. Code, Insurance § 19-205
Insurers must notify you that the standard homeowners insurance policy does not cover flood and that flood insurance may be available through the National Flood Insurance Program or as a separate policy.
Read the Law: Md. Code, Insurance § 19-206
Certain Dog Breeds
Insurers must notify you if your policy does not provide coverage for losses caused by specific breeds or specific mixed breeds of dogs.
Read the Law: Md. Code, Insurance § 19-206.1
Anti-Concurrent Causation Language
Some policies contain a clause which states that a loss caused by a combination of covered and noncovered perils will not be covered. These provisions are called “anti-concurrent causation” clauses. Your insurer must notify you if your policy contains an anti-concurrent causation clause.
Read the Law: Md. Code, Insurance § 19-215
Obligations Following A Loss
When you are the victim of a theft, fire, or any other type of accident or loss involving your home, you should take the following steps:
- Give immediate written notice of a claim or possible claim to your insurer. Homeowners policies typically require that notice be made as soon as possible. Your failure to comply with prompt notice requirements could result in a denial of your claim. The policy should contain instructions on how and where to submit the notice, or you may check the insurer’s website.
- Notify the police, bank or credit card company, particularly in the case of theft.
- Protect your property from further loss or damage. If you make temporary repairs in this process, such as buying plywood or nails to board up broken windows, keep a record and save all receipts.
- Create an inventory of damaged, destroyed or stolen property or possessions.
- Cooperate with your insurer in its investigation of the claim. The insurer may require you to submit a “proof of loss” or itemized list of all damaged, destroyed or stolen property, or it may want to inspect the damaged property at your home. Do not dispose of any damaged property until your insurer inspects it or tells you can dispose of it.
- Consider whether you would like to hire a public adjuster who will work to settle the claim on your behalf. Be sure the adjuster has a valid adjuster license by contacting the Maryland Insurance Administration or by searching their website.
Maryland’s Unfair Claims Settlement Practices law requires the insurer to take certain actions in the handling of your claim. Among other acts, the insurer may not:
- misrepresent pertinent facts or policy provisions that relate to the claim or coverage at issue;
- refuse to pay a claim for an arbitrary or capricious reason based on all available information;
- fail to settle a claim promptly whenever liability is reasonably clear under one part of a policy, in order to influence settlements under other parts of the policy;
- fail to provide promptly on request a reasonable explanation of the basis for a denial of a claim;
- fail to act in good faith in settling a property claim.
Read the Law: Md. Code, Insurance § 27-303
If you have questions or concerns about the way your claim is being handled, you may contact your insurer directly, or you can contact the Maryland Insurance Administration.
Cancellations and Nonrenewals
Insurers must strictly comply with Maryland law when canceling or refusing to renew your homeowners policy. A “cancellation” is the termination of your policy during the term of the policy before the policy’s expiration. A “nonrenewal” is the refusal to renew your policy for another term upon expiration of the current policy.
By law, an insurer is required to give the policyholder notice of the proposed cancellation or nonrenewal at least 45 days in advance, unless the cancellation is for nonpayment of premiums, in which case the notice must be given at least 10 days in advance.
Your insurer may cancel your insurance policy at any time for nonpayment of a premium. The insurer must mail notice that the policy will be canceled for nonpayment of premium 10 days in advance to the named insured’s last known address. Proof that you actually received notice is not required.
Read the Law: Md. Code, Insurance § 27-602(d)
An insurer may cancel a person’s insurance policy mid-term under the following conditions
- if you commit fraud or make a material misrepresentation in connection with the application, policy or presentation of a claim;
- if a matter or issue related to your risk constitutes a threat to public safety;
- if a change in the condition of the risk results in an increase in the hazard insured against;
- if you fail to pay your premium when due; or
- if you are convicted of arson.
Read the Law: Md. Code, Insurance § 27-602(c)(5)
In addition, a homeowners insurer may cancel or refuse to renew a policy on the basis of:
- the number of claims made by the policyholder within the preceding 3-year period;
- three or more weather-related claims made within the preceding 3-year period;
- a change in the physical condition or contents of the premises that results in an increase in a hazard insured against and which, if present and known to the insurer prior to the issuance of the policy, the insurer would not have issued the policy;
Read the Law: Md. Code, Insurance § 19-214
An insurer may not refuse to issue or renew a homeowners policy solely because the risk or insured’s address is located in a certain geographic area of Maryland, unless at least 60 days before the refusal, the insurer has filed an explanation with the Maryland Insurance Commission.
Read the Law: Md. Code, Insurance § 19-211
Filing A Complaint Against Your Insurance Company
If you feel that the amount of money offered by your insurance company to pay for a loss is not fair, or if you feel that the insurance company has not acted in “good faith” in handling your claim, there are several courses of action that you may consider:
- You can contact your insurance company or producer to attempt to resolve the dispute;
- You can demand an appraisal, a procedure set forth in the insurance policy for determining the value of a claim;
- You may file a complaint with the Maryland Insurance Administration; or
- You may hire a lawyer to represent your interests and/or attempt to resolve the dispute in court.
Help from the Maryland Insurance Administration (MIA)
The MIA provides information on how to file a complaint on its website. You may also contact the MIA by phone.
The MIA has established a Rapid Response Program designed to help certain consumers (such as homeowners) quickly resolve claims without having to file a formal written complaint. Participation in the Rapid Response Program is voluntary and does not affect your rights to file a formal complaint.
A Maryland consumer who believes that their insurer failed to act in good faith in making a decision regarding the insurance claim may seek special damages against the insurer. Some complaints must first be submitted to the MIA before they can be filed in court. An explanation of when a consumer can seek these special damages, and when a complaint has to be filed with the MIA, and how to make that filing are explained in a MIA publication: A Guide for Consumers Filing a § 27-1001 Civil Complaint.
Read the Law: Md. Code, Insurance § 27-1001