Buying your first home in Maryland: a homeowners insurance checklist

Your lender will require homeowners insurance before you close, so it lands on every first-time buyer's to-do list, usually somewhere between the inspection and the final walk-through. It deserves more attention than that. Here's a checklist in the order things happen, with the Maryland rules worth knowing along the way.

1. Before you make an offer

• Read the seller's disclosure. Most Maryland home sellers have to give you either a property condition disclosure or a disclaimer saying the house is sold as is. The disclosure covers the roof and structure, plumbing, electrical, heating and air conditioning, and water and sewer systems, which are the same things insurers ask about.
• Check the flood map. Look up the address on FEMA's Flood Map Service Center. If the house is in a high-risk flood zone and your mortgage comes from a federally regulated or insured lender, flood insurance will be required.
• Ask about past claims. Ask the seller whether there have been insurance claims on the house, especially for water or roof damage, and what was repaired.

2. During the inspection

• Note the age of the roof, wiring, plumbing and heating. Insurers use these to decide whether to cover a house and what to charge. Some limit how they pay for damage to an older roof.
• Flag anything that could make the house harder to insure, such as an aging roof, outdated wiring, an underground oil tank, or signs of past water damage.
• Send me the inspection report. I'll tell you whether anything in it will be a problem for insurers while you can still negotiate repairs or credits.

3. Shopping for the policy

• Insure the rebuild cost, not the price. Your dwelling limit should be what it would cost to rebuild the house at today's prices. That has nothing to do with the purchase price, the tax assessment or the value of the land. I run a reconstruction cost estimate on every quote.
• Decide on water backup coverage. A standard policy doesn't cover water that backs up through a drain or sewer line or overflows from a failed sump pump. Maryland insurers have to offer this coverage in writing, and for a finished basement it's one of the first things I add.
• Look closely at liability. It protects your savings and future income if someone is hurt at your home, and higher limits usually cost little for what they add.
• Choose a deductible you could pay comfortably. A higher deductible lowers your premium, and small claims can cost more in future premiums than they pay out.
• Price your home and auto together. A bundle often earns a discount, but it's your choice: Maryland law doesn't let an insurer turn down your homeowners policy just because your car is insured somewhere else.

One thing you don't need to worry about: Maryland bars homeowners insurers from using your credit history to accept, price, cancel or renew a policy.

4. What your lender needs before closing

• Proof of coverage. Usually a declarations page or binder that lists your lender as the mortgagee, sent to your lender or title company before closing.
• The right start date. The policy should begin on the day you take ownership.
• The first year's premium. It's usually paid at or before closing and shows up under Prepaids on your Closing Disclosure. After that, your lender may collect it monthly through an escrow account and pay the insurer for you.
• Flood insurance, if it's required. National Flood Insurance Program policies usually take 30 days to start, but there's no waiting period when the policy is bought in connection with your mortgage closing. If the seller has a flood policy through the program, it can be transferred to you, so ask early whether there is one.

5. After you move in

• Record what you own. A quick video of each room, closets and drawers open, makes a claim much easier.
• List your valuables. Jewelry and watches have low theft limits on a standard policy. Listing them individually gives them their own coverage amount.
• Review the policy at renewal. Renovations, a finished basement or a new roof can change what you need and what you pay.

Maryland rules that protect you as a homeowner

• Questions aren't claims. A homeowners insurer can't refuse, cancel, non-renew or raise your premium because you asked about your coverage or the claims process, as long as no claim was paid.
• Weather claims have limits. Generally, an insurer can't cancel or non-renew your policy over weather-related claims unless you've had three or more in the past three years.
• Older claims don't count. An insurer can't turn down, cancel or non-renew a homeowners policy because of a claim from more than three years earlier.
• Cancellations are limited. Once your policy has been in force for 45 days, an insurer can cancel it mid-term only for specific reasons, such as non-payment, fraud or a change that increases the risk. It has to give you 45 days' written notice before cancelling or non-renewing, or 10 days for non-payment, and you can ask the Maryland Insurance Administration to review the decision.

Frequently asked questions

Sources: Maryland Real Property Article § 10-702 (seller disclosure); Insurance Article §§ 19-202, 27-501 and 27-602; FEMA's flood insurance guidance on required coverage, waiting periods and policy transfers; and the Consumer Financial Protection Bureau's Closing Disclosure form. This guide is general information, not legal advice. Your policy controls.