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posted: 8/22/2014 12:01 AM

Don't get frazzled when lightning strikes

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Most homeowners insurance policies will cover damage caused by lightning, but there are exceptions to the rule.

Q. If a lightning bolt strikes our home, would it be covered by our homeowners insurance, or would it be considered an "Act of God" that we would have to pay for ourselves?

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A. That's a good question for this time of year, the peak season for electrical storms in most parts of the nation.

A typical homeowners policy (called an "HO-3," which 80 percent of us own) will cover damage caused by a lightning strike, said Jeanne Salvatore, a vice present at the nonprofit Insurance Information Institute, www.iii.org. It also will cover most related damage, such as the carpet or a couch ruined by rain that might pour in after a strike sets off a small fire on the roof.

Power surges, which can immediately wipe out a computer or TV, raise more complicated issues. Many insurers will cover a loss if the surge is caused by a lightning strike directly on the homeowner's property, but won't pay if the surge is caused by a bolt that hits a power line that's a block away.

Smart owners have all of their electric-powered appliances and other gizmos plugged into a basic surge protector (about $10 or $20 at most computer or office-supply stores), or even add relatively inexpensive "surge protection coverage" to their homeowners policy.

Some insurance agents say that a surprising number of scheming homeowners try to file a claim to replace an older TV or fancy stereo system that they swear was ruined by a lightning-caused power surge. A telltale sign that the claim may be fraudulent is that there aren't any scorch marks on the outside of the item, its internal circuit board or the electrical outlet on the wall.

Q. We are planning to buy our first home in the fall, so we have already started trying to cut our debt and spending to improve our chances of getting the largest mortgage possible at the very best interest rate. We were thinking about cutting up and closing the accounts of two of our credit cards that don't have any balances on them, but my brother-in-law says that would be a bad idea because it could actually hurt our credit score instead of help it. Is this true?

A. Your brother-in-law is correct. It may seem goofy, but would-be homebuyers who cancel their credit cards before filing their mortgage application often see their overall FICO credit score drop. In turn, that can lead to a lower mortgage amount or a higher interest rate -- if they can get the home loan at all.

The culprit here is what banks and credit bureaus call "credit utilization," which accounts for about one-third of a consumer's score.

Let's say you have three credit cards, each one with $5,000 limits. Two of those cards have zero balances, but there's $3,000 in debt on the third one. Today, your utilization level would be a low 20 percent ($3,000 divided by $15,000 equals .20, or 20 percent). But if you ditch the two cards that don't have a balance, your credit utilization would soar to 60 percent -- enough to make many lenders cringe when they start to evaluate your mortgage application.

A better idea would be to put the two cards that don't have any debt into a drawer or safe-deposit box, and then leave them alone unless you run into a real-life financial emergency. Doing so will keep your credit-utilization rate low, which in turn will bolster your chances of getting the largest mortgage possible at the best interest rate.

Q. I am a single parent who owns a townhouse in a large development. The homeowners association here, which charges me $225 a month in maintenance fees, really stinks. The landscaping company it hired doesn't do a good job, our pool is basically unusable because there's so much chlorine in it, and the cracks in the stucco on the exterior of my own unit are now letting bugs and even rain into my house! My complaints to the HOA's board of directors haven't been acknowledged. Can I just stop paying my monthly dues until these problems are corrected?

A. Probably not. Most states have laws that require an owner who lives in a development that's governed by an HOA to continue paying the monthly dues, even if the owner is dissatisfied with the association's service.

This general rule of law was reinforced earlier this year, when the Illinois Supreme Court ruled that a condo owner wasn't able to refuse paying her monthly assessments after claiming that the HOA failed to repair a leaking roof that subsequently damaged her unit. The court reasoned that allowing an individual owner to skip the HOA payments simply because she or he didn't like the work that was being done would put an unfair burden on neighboring owners, who'd have to foot a prorated share of the unpaid association dues and repair bills.

I understand your concerns about how your homeowners association is being run: Believe me, I've been there myself. Send a letter, via certified mail, to your HOA's board of directors that explains your problems. Send a copy to the association's property-management company, assuming the association has one.

Most HOAs are regulated by state agencies, which might go by such names as the department of real estate, the real estate commission, the department of corporations or even the department of consumer affairs. Call the appropriate agency for further advice.

Also consider running for a seat on the HOA's board of directors when the next election is held. There's no better way to solve a problem, whether it's your own or a neighbor's, than "governing" your own property.

Real estate trivia: Only 10 percent of wildfires in the U.S. are caused by lightning, the Insurance Information Institute says. The other 90 percent are caused by campfires left unattended, burning debris, discarded cigarettes that are still smoldering or arsonists.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

© 2014, Cowles Syndicate Inc.

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