Truth be known, most of us don’t know beans about insurance. We know that certain forms of it are required, but that’s about it. We need auto insurance if we’re going to drive a car, we need homeowners insurance as long as we still owe money on our homes (and will keep it if we’re smart afterwards). Beyond that, most of us really don’t know a whole lot about our insurance policies.

Unfortunately, when it comes to homeowners insurance, many of us don’t get educated regarding what is or isn’t covered until it’s time to put in a claim. And all too often, what we find out is not exactly good news.

Generally speaking, most homeowners insurance policies will cover you against the following things:

• Damage to the home from wind, hail, lightning, and other storm related damage.
• Theft from the premises.
• Liability for anyone who is injured on the property, as long as the injury was not the result of gross negligence on your part.
• Damage or destruction of your home due to fire.
• Loss of possessions (furniture, jewelry, appliances, clothing, etc.) as a result of any of the above.

Perhaps even more important, you should know what your homeowners insurance does NOT cover. While this differs from policy to policy, most homeowners insurance policies do not cover the following, unless the policy states otherwise:

• Flood and other water damage.
• Loss of use. In other words, your insurance will pay to replace your home, but your on your own affording new digs while your home is being rebuilt or repaired.

It can be tempting to shop for homeowners insurance like you would shop for most anything else, by simply comparing bottom line prices. Let me assure you, this is not a good idea. Make sure your insurance agent goes over exactly what your policy does and does not cover with you. You should also make sure that you are fully aware of what your deductible will be if you need to make a claim. The last thing you want is to have a major loss and discover that your insurance doesn’t cover the particular type of damage.

C’mon, admit it: you’ve thought about it, maybe even dreamt about it. We don’t blame you. Really, when it comes down to it, who wouldn’t want to own his own castle? Sure, the cost of homeowners insurance would be through the roof, but can you imagine driving your Beemer home every day and parking it outside?

It Ain’t Cheap

To be sure, owning a castle is expensive. But it’s probably not nearly as expensive as you think it is. Castles in Scotland, Ireland, and England are available for as little as a million dollars. Most castles range closer to two or three million, but if you’re on a budget, you can buy a fix’er’upper for a mil.

Castles in most parts of Europe, when they are available, run around the same price. Perhaps your best bet, if you want to own a true medieval castle, is to look into buying one in the former East Germany or one of the other former Communist Bloc countries.

Where the Best Deals Are

When the Communists took charge in East Germany following World War II, the government seized the castles, making them the property of the East German government. Following the fall of the Berlin Wall in 1989, the East German government sought to give the property back to its former owners or their descendants. Many of the property owners no longer wanted their castles, however (usually because they had fallen into disrepair). Still other owners could not be found. Castles that were not claimed reverted to the government, which has tried (with mixed success) to sell them.

These days, you can buy a castle in eastern Germany, especially in Saxony, for about 1/3 of the price f castles elsewhere. In some cases, the local governments will even GIVE you the castle (that’s right, for free) as long as you demonstrate your intentions and ability to renovate it.

If You Want Something Done Right…

Another option is that you could build a castle. While you wouldn’t be able to say you own a genuine medieval castle, you would at least know that all of the fixtures are up to date, saving you a bundle on homeowners insurance. Unfortunately, it can be tough to find a contractor who has any experience building castles, so the price still hovers pretty close to a million bucks for a small castle. Even do-it-yourselfers can count on spending upwards of half a million.

Most people look forward to reading every line of their homeowners insurance policy about as much as teenagers look forward to bedtime. Instead of pouring over the details, they look their agent in the eye, shake hands firmly, and rely on their trust in that relationship to protect them in case the worst should happen.

If you haven’t checked out your homeowners policy lately, though, there may be a few things you’re missing. Most policies have limitations and exclusions that could make you mad as a hatter if you find out too late. While there is no standard policy, many insurers have begun implementing standard limitations and exclusions.

• Dog Bites. Dog bite claims have gotten so expensive in recent years, many insurers are dropping coverage altogether. Others exclude certain dog breeds, while still others have a one-strike policy. In cases where dog bites are still covered, many policies limit the benefit amount, which could leave you exposed financially if your dog bites someone on your property. If you’re a dog owner, you should find out what coverage limitations and exclusions are in your policy, and take steps to prevent your dog from biting.
• Floods. Homes in flood-prone areas are required by law to have flood insurance. Many floods, however, happen outside the flood zones and cause extensive damage to homes. Homeowners insurance does not cover flooding in most cases, but you can purchase separate flood insurance at an additional cost.
• Theft. While theft is usually a covered event on most homeowners policies, there may be limitations to the benefit amount. For example, most policies will cover only about $1,000 to $2,000 for theft of jewelry, and losses for cash on hand is usually limited to about $100. To increase your coverage for loss from theft, purchase a personal property floater, or scheduled personal property endorsement, which can typically be added on as a rider to your existing policy.
• Home Businesses. Although most policies cover office equipment in residential policies, they often cap coverage at $2,500 – $3,000. If you have a computer, fax machine, printer, copier, scanner, and other digital devices that you use for business purposes, chances are your homeowners policy supply you enough coverage to protect you fully against losses. In addition, if a client or anyone else slips and hurts themselves on your property, your homeowners policy won’t protect you against liability. To make sure you’re covered, investigate the option of adding a home business rider to your existing policy.

Until hurricane Katrina, the Federal Emergency Management Agency (FEMA) flood insurance program was fully self-funded through private flood insurance contributions for decades. But Katrina caused so much damage from flooding that FEMA is now billions of dollars in debt. It has recently sought to protect itself from disproportionate payouts by reevaluating the nation’s flood zones, and the new maps are forcing many to buy flood insurance who never have before.

Flood insurance is not like homeowners insurance. For one thing, it doesn’t cover all of your valuables in the event of a loss. By law, any home that resides in a Special Flood Hazard Area must have flood insurance to protect against financial losses. The price tag will depend on where you live, the level of risk that flooding will occur, and the value of the home itself.

• Your lender can force you to purchase flood insurance. In fact, depending on where you live, your lender may not have a choice but to require it.
• FEMA has undertaken a massive effort to modernize flood zone maps. This has resulted in many homeowners who’ve lived in the same place for years suddenly finding themselves in a flood zone.
• Flood insurance may cost several hundred up to a few thousand dollars per year, depending on your risk and the value of your property.
• Just because your home hasn’t flooded since you’ve lived there, or even in the past 20 years or more doesn’t mean it can’t flood in the future. Consider how long New Orleans was thriving before floods washed away major chunks of the city.
• FEMA has a process in place that allows you to dispute the decision which placed your home in a flood zone.
• You can also hire an independent surveyor to determine the likelihood of flooding on your property. The service may cost you several hundred dollars, but it could save you more in flood insurance premiums over the years if you are proved correct.

No one is perfect, and mistakes are sometimes made. After all, keeping track of every river, lake, stream, and pond across the United States is no small job. Land and water features change over the years, and maps can easily become out of date. If you believe you’re being forced into buying flood insurance when you shouldn’t need it, with a little bit of research you may be able to refute their assessment.

Whenever you submit a claim against your homeowners insurance policy, your insurer could deny it. Dealing with denied claims can be frustrating, confusing, even frightening, but you don’t have to take no for an answer. While in many cases denied claims are simple errors or miscommunications, a claims denial could also represent fraud. If you think you’re not getting what you paid for, don’t let the matter rest until you’ve gotten to the bottom of things.

1. Review the denial. When the insurance company denies your claim, they should provide a reason. Make sure you understand their rationale.
2. Certain types of claims and damages may be excluded from your policy. For example, many insurers exclude dog bites or provide only limited coverage, and flood damage is typically not covered by a standard homeowners policy. Instead, flood insurance is sold separately. Always review your policy to make sure the damage in question is covered.
3. There may be policy maximums on certain types of claims. If your claim exceeds the amount of coverage, you may only be eligible for partial reimbursement of your loss. Verify your coverage amounts in your original policy document.
4. If you believe your claim should be covered after reviewing your policy, you can appeal your denial with the insurer directly. Making an appeal is no guarantee of payment, but if you don’t appeal, the denial will be the final word. Appeal the decision in writing, and keep a copy of any paperwork you submit.
5. Be sure to gather evidence in support of your claim. Take photos, get estimates for repair work, and have documentation of medical bills, when appropriate. Keep a copy for yourself, and provide one copy to your insurer.
6. Follow up on a regular basis to track the status of your appeal. Be sure you know who you are talking to when you call, and keep notes of the conversation.
7. If the insurer refuses to resolve the issue in a fair and appropriate manner, you do have recourse. You can hire an attorney to represent you in a lawsuit against the insurance company. Just be sure you have everything documented to provide evidence to the court. Even if you aren’t awarded the full amount of your claim, you are more likely to get a fair deal if you raise concerns than if you simply take no for an answer.

Negotiating for what’s fair and documenting the facts as they take place are always good skills to have at hand. You will be sure to have evidence to back up your side of the story in any claims dispute, you could easily affect the outcome if you’ve done your homework.

A typical homeowners insurance policy won’t necessarily cover all the different events that could cause damage to your property. While most policies cover fire, wind, and severe storm damage, certain areas are more prone to different kinds of natural disasters, and the more likely the damage from a specific type of event, the less likely it is that your homeowners insurance policy will cover it.

• Know your exclusions. Most policies come with certain exclusions, meaning the policy won’t pay out for certain things. Many insurers are now excluding dog bites, for instance, because of the rise in both the number and expense of dog bite claims. But your insurer may exclude other types of damage based on the risk. If the risk is very high in your area, chances are the damage will not be covered.
• Know the area. If you’ve lived in the area all your life, you probably already know what risks there are. Midwestern homeowners experience a higher likelihood of tornadoes, while Floridians are at risk of hurricane damage. Homes in California often need earthquake insurance, but houses in other areas could also be at risk. If you are new to the area, ask your neighbors about their homeowners insurance policies to get a feel for what is usually covered. This can also be a great way to find a good insurance company.
• Hazard insurance is not liability coverage. While homeowners insurance typically covers both property damage and liability for accidents, hazard insurance does not. Instead, it covers property damage that results from specific events such as fire, wind, storm, or other natural disasters, depending on what is specified in the policy.
• Be sure to ask. Your insurance sales agent is your best bet for determining what is covered by your policy and what is not. You can also review your policy to see what is and is not covered.
• Flood zones. If you live in an area at high risk of flooding, your lender is required by law to force you to buy flood insurance. Areas that are at elevated risk for other disasters or weather events may not have the same rules. If your policy excludes damage from wind or severe storms, you should look into buying hazard insurance that covers it.

The best way to be sure you are covered in the event of vandalism, fire, flood, earthquake, or windstorm is to review your policy. If there are exclusions for any of these types of events, you probably can (and should) look for hazard insurance separately.

Most people by homeowners insurance based on the amount of square footage they have and the neighborhood they live in. Typically, a bank or other mortgage lender requires you to carry only enough insurance to cover their losses in the event your home is destroyed by fire, but that isn’t necessarily enough.

Even though your insurance policy may be enough to pay off your loan in the event you lose your home to a natural disaster, fire, or other threat, you could be left without help when it comes time to rebuild. That’s why it’s important to consider what it would really cost to replace your home if it were completely destroyed.

• Consider the cost of construction materials today compared with what they were when you purchased the house. Chances are, costs have gone up, and you will have to pay more if you need to rebuild.
• There may be building code requirements that were not in place at the time your home was built. This could result in higher costs for rebuilding than anyone has taken into consideration.
• In the event of a fire, tornado, hurricane, or other disaster, your home may be destroyed, but the rubble will likely remain. Your lot will need to be cleared of debris before new construction can start.
• You will need to hire an architect to design a new building to replace the home that was destroyed. These costs are not likely to be factored into the current estimate, because they are based on what the house itself is worth, not the cost of replacing your home.
• If your area is hit by a natural disaster, demand for construction and materials will go through the roof. Not only could it take longer for your home to be rebuilt, meaning you will have to extend your stay elsewhere at a considerable cost, but the estimate to rebuild could be much higher than you had planned.
• There are resources you can use to estimate the cost of rebuilding your home. While it may raise your insurance premiums, it’s smart to consider expanding your coverage to include replacement costs.

Cutting corners on coverage to save a little on premiums is short-sighted. It could land you in a world of hurt if things don’t go as planned. Should the worst happen, your family could be left out in the cold without adequate coverage.

You can get some serious benefits from being part of a local homeowners association. However, they’re not always what they’re cracked up to be. In some cases, being involved in a homeowners association can be a real nightmare. What makes matters worse is that, in many instances, you’re simply at their mercy. If they set their sights on you, no amount of homeowners insurance can protect you from the damage that they can do to you.

Here are a few homeowners’ association from hell scenarios:

• The “we want your home” scenario. Picture this: you like to plant roses. It’s even a bit of an obsession. You plant roses on your four acres of property. The only problem is that it’s too many roses for the homeowners association’s tastes. They charge you a fine, which grows over time. They then put a lien on your house. You lose a lawsuit because you regarded the property in the process of planting your roses. This actually happened to a man in California.
• The “we can’t tell you” scenario. Some homeowners association boards play things pretty close to the chest. They might withhold important information from you. For example, one board in Maryland got their panties in a wad when they felt like some homeowners were sharing too much information about the association with other homeowners, including things like budgets.
• The “we’re all lawyers” scenario. Some homeowners associations just seem to like to go to court. One estimate suggests that as many as three quarters of all of the homeowners associations in the state of California have at least one case going on in the courts system. Overall, the statistics nationwide are thought to be at around 60 percent.
• The “you can’t sell that” scenario. So, let’s say it’s time to move. If your home is involved with a lawsuit with the homeowners association, you’re not going to be able to sell it. Simply by filing suit, the homeowners association can keep you from selling your house and moving.
• The “power trip” scenario. It’s easy for folks on a homeowners association board to get out of control. When left unchecked, a small group of individuals can create all sorts of trouble for everyone else. This happens far too often.

All of that said, there are scenarios in which a homeowners association can be a good thing. Just make sure you know what yours is like before you buy.

Some home owners, after falling behind in their payments, have allowed their mortgage companies to purchase homeowners insurance on their behalf and apply the extra charges to the mortgage payment. Frankly, that’s a very bad idea. Here’s why:

1. When your mortgage company buys the insurance, even if you are paying for it, they will generally only buy enough insurance to recompense themselves in the event that tragedy strikes and you lose your home to fire, tornado, or other disaster. While this does relieve you of having to pay off the mortgage, it doesn’t do squat for giving you any money to live on, or for replacing anything that was damaged in your home. You’re on your own for all of that.

1. When your mortgage company buys the insurance for you, they have no real vested interest in keeping the prices down or shopping around. Therefore, they will simply run you through the homeowners insurance company which they always use. The bottom line here is that you will almost always end up paying more for your insurance than if you had bought it yourself.

1. Often, the reason why mortgage companies buy the insurance for you is because your home has problems which would stop other insurance companies from accepting the risk. If this is the case, why are you living in the house? It’s dangerous. Chances are, if you live in this kind of house, you are fixing it up while you live in it. The problem with having your homeowners insurance through your mortgage lender is that you have no one to go to as you make improvements to make your case for a better rate.

If you’re in the situation of living in a fix ‘er up home while you’re trying to remodel it, the last thing you need is an extra expense. In many cases, you would be better off to rent an apartment while you are fixing the house up. In our own personal experience, a small apartment would have cost us less money than the extra insurance premiums we had to pay because standard companies would not insure the home. Trust us on this one: if you can’t afford to live elsewhere while you fix the home up, and it’s in bad enough shape that insurance companies won’t touch it, you need to get out of the home remodeling gambit.

Image by Kyle Kruchok

You won’t catch us saying “trust the government” very often, but when it comes to dealing with issues concerning your home ownership, you might want to at least check with the government concerning anyone who claims they are going to help you. With the exception of your mortgage company, your homeowners insurance company, and your immediate relatives, most of the organizations who offer you unsolicited help will only help relieve your bank account of what little you have left.

Let’s face it, we were all hit by the housing bubble. Our home values dropped, many of us were stuck with increased payments due to adjustable rate mortgages cranking the interest rates sky high, and some have even lost their homes to foreclosure. Unfortunately, the best homeowners insurance in the world doesn’t protect us from any of those things.

If you’re behind on your mortgage payments and in danger of facing foreclosure, your bank or lending institution has to file claims with your local courts. Unfortunately, these are public records which can be viewed by anyone. They are often published in the local newspaper, so any scam artist or con man can easily tell whom they can target.

Many of the scams being run offer help protecting you from foreclosure in return for a one time fee, typically $1,000 or more. The reason why the fee is one time, of course, is that the con artist will be long gone with the cash from every sucker who gave him money long before he would’ve been able to collect a second fee anyway.

So, who can you trust? Believe it or not, for this one, it’s the government and your lender.

Your first course of action if you are in danger of losing your home should be to contact your lender. They are thoroughly versed with all of the latest government programs which are designed to help you stay in your home. And in today’s market, they are more than happy to try to do whatever it takes to help keep you in your home. They would much rather get you back on track with your mortgage than be stuck with a foreclosure that will be sold for half of what you owe on it due to plummeting home values.

If you think you may have already been scammed, contact your local authorities immediately. They represent your best chances of being able to recover your money and bring con artists to justice.

Image by neighborworksamerica