Learn about different types of homeowners insurance, how to use it, and what to do if you have a dispute with your insurer.
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.
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:
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:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Insurers may not refuse to underwrite homeowners insurance because of your credit history and may not use your credit history when pricing a policy.
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.
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.
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.
Maryland law requires insurance companies to provide certain notices to policyholders and applicants, including:
You are entitled to receive an annual statement that summarizes the coverages and exclusions under your homeowners insurance policy.
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.
Insurers must notify you if your policy does not provide coverage for losses caused by specific breeds or specific mixed breeds of dogs.
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.
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:
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:
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.
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.
An insurer may cancel a person’s insurance policy mid-term under the following conditions
In addition, a homeowners insurer may cancel or refuse to renew a policy on the basis of:
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.
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:
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.