Another Way to Protect Your Retreat, by E. E.

I am sorry. This article is not about debating the best calibers for your main battle rifle or dehydrating meat. It is not even a topic most people consider suitable for dinner conversation. It is not about any topic that I have seen on this blog, but it is crucial if you have a retreat property and want to protect it.

You see, about six months in December 2011 ago it got very cold here in our rectangular state. Close to zero actually. But first, let’s go back another six months to May of 2011. While on the road traveling to a Midwestern state to visit family, we decided to check the local area to see if there was any property for sale.

I am sorry again. We need to go back to the summer of 2009. We were on the road to meet some friends of ours at a lake cabin. Our three boys were looking forward to spending some time with their friends swimming and jet skiing. Long story short, our car broke down on the freeway. White smoke. Puddle of transmission fluid. Heavy duty wrecker. Transmission destroyed. A familiar story. He brought us back to a small town off the Interstate. This was the Fourth of July weekend and this particular little town still had a celebration for that. While the technicians at the garage looked at our car after hours, the rest of the town was at the parade. They test drove it. To their amazement it ran, adequately. Since it was a holiday weekend and towing it back to the dealership didn’t quite work out the way we had hoped, their advice was to drive it back to town, slowly, and carefully. Okay. Well, we had to eat first. The little diner they recommended a “very small town” local cafe. We ordered. We ate. The owner asked what brought us here and we told us pathetic story. The waiter bought our dinner. We cried. We fell in love with this tiny little town just off the Interstate.

Fast forward back to May 2011. When we looked to see if there was any property for sale, we found one. And only one. It was a log home on 35 acres about 30 miles from the middle of nowhere. After looking in the big metro area of our rectangular state for such a property, we expected the price to be well north of a million dollars. It wasn’t, it was less. Much less. Enough less that we could cash out our retirement plans and buy the thing outright. Just a note here. We always seek the Lord’s advice on these matters. Actually every decision we make we ask the Lord first, but that’s another, much longer article. We made an offer on the property. They countered. We countered back. We did that a couple of times and finally made a deal. Actually, it was every nickel we could scrape together. We even took out a home equity loan as we could not get a mortgage on the property because there were comparable properties for 100 miles around and no bank would underwrite the loan despite our very above average credit. After buying it, we bailed out of work each Friday and spent the weekend at our new retreat.

Sorry to keep jumping around in the timeline, and sorry for having to keep apologizing. Back to December 2011 and the very cold winter: The log home had two furnaces. We always set them to about 60 degrees when we weren’t there to avoid any problems. We had a problem. Actually two problems. The furnace in the basement failed. And the furnace up on the second floor failed. This led to problems three through ninety-nine. Without heat, the pipes froze. Freezing pipes burst. Water exploded out of the second floor bathroom at an alarming rate, for most of a week. Part of the second floor was now on the main level, while most of the main level was in the basement. Upon arrival, we cried again.

Up until now, I really have not told you what the topic of this article is: Insurance. I now realize the importance of insurance and it relationship to a retreat property. There are a two main types of insurance. The most common, by far, is called “home owner’s insurance” and goes by several different brandings by different insurance companies. Most of these policies fall into a couple different categories, such as HO-3 for your typical policy. There is also an HO-5, which is more of a deluxe version typically for newer homes. These policies typically cover “all perils” except those specifically excluded. The other broad type of insurance is termed “Dwelling Policy.” There are various flavors of that type of policy, but typically the policies covered “named perils” only. That is, only the causal events named in the policy are covered. These policies are typically written for seasonal, vacation or rental properties. They are also written for retreat properties when the agent is not familiar with the intended purpose of the property, is negligent, or even deceitful in quoting an inadequate policy at a low rate in order to get your business.

By now, you have probably realized that we had a Dwelling Policy. If I were a betting man, I would also wager that the more intuitive are also coming to the conclusion that Dwelling Policies do not cover pipes bursting and the ensuing water damage they cause.

It actually took about a week and half before the reality set in that we had substantial damage to our retreat that was not being covered by insurance. The bill for the water extraction and drying alone was more than $16,000. We had little savings left, but had a little more room on our home equity loan which was depleted within the first month of repairs.

This is when the Lord spoke to us again. He told us that we were not treated fairly when the policy was written and to inquire with our state’s regulatory agency that oversaw the insurance industry. We were obedient. We fought. We documented. We wrote letters, lots of letters. We sent photos. We made statements of what was told to us by our insurance agent.

Now here is something that a lot of people do not know. Most service professionals, such as insurance agents, have insurance that covers them in the event that they make a professional mistake. This is called “errors and omissions” insurance. With a bit of divine-inspired digging, we found the underwriters of our agent’s “errors and omissions” insurance and put in a claim. We plead our case. They resisted. We pleaded with the regulatory agency. They wrote letters on our behalf. We pleaded some more. The insurance made a low settlement offer. We pleaded. They sent an adjuster out to estimate the damage. They made another low offer. We pleaded yet again. After six months of negotiation, we settled. It was much more than they originally offered, but not as much as we wanted. But it was close to what we needed.

Another useful term to know is “tax deduction for an uninsured casualty loss.” We were fortunate in that our retreat property was also a working ranch. This qualified us to receive a tax deduction for the portion of the loss that was not covered by insurance. Remember way up near the beginning of this article the part about cashing out our retirement plans? Well that, as one would expect, resulted in what the Internal Revenue Service (IRS) calls a taxable event. Not only that, it seems there are substantial penalties for accessing your own money before the IRS determines that it is the proper time to do so. This uninsured casualty loss deduction nearly balanced out the taxes and penalties assessed for accessing our money. It is inconvenient, but I would rather pay a construction worker to help repair the damage than have the money taken for redistribution by those above my pay grade.

As of today, we are almost free from debt again. There is a lot of work left to do to restore the retreat property to a condition, not just as it was, but Lord willing, better; the we He seems to want it. My family has moved out to the ranch full time and the boys are enrolled in the local school. I am able to work from there about half the week, spending the balance of my time working two hours away in the city. We are in the process of raising chickens and goats.

The interesting thing is that if we had a “good” insurance policy at the time, we would not have come out as well financially. Wait, that goes against the whole point of this article. Ignore that.

What I meant to say was to get proper insurance coverage for your retreat. Know what perils your property is covered against.

One more thing. Last weekend there was an “update” to the situation. Our region was devastated by a freak hail storm. I have never experienced an hour and a half of constant hail and had never in my life seen hail drift into piles more than three feet high. I now have seen both of those things. It broke out several of our windows, ruined our roof, let inches of water into our home, destroyed our car and deck, and there is not a whole lot left of our garden. The onions seems to be holding up fine, however. The car that was destroyed was the same car we were driving in 2009 and had the very same transmission that "blew up" so dramatically on the highway. But we learned from our experience earlier in the year and are insured for most of that damage. You see, we have an HO-5 policy on our retreat now. – E. E. (Living in a rectangular state.)