It’s something that very few people think about, but if you were to experience a total loss of your home, would you even know what personal property you had to replace? Everything from appliances, furniture, and clothing to fine art, jewelry, and special collections should be documented. Insurance policies are contracts of indemnity, which means the intent is to restore an insured to the financial state they were in before the loss – no better, and no worse. But how can a homeowner policy ensure that happens if there isn’t an understanding of the actual property in the home?
The idea of documenting absolutely everything in your home is an overwhelming task to say the least, but there are ways to make it more manageable.
- Use your smartphone and do a walkthrough your home. Note the brand of appliances, furniture, and anything that is easily spotted in the video. Don’t forget the garage and tools.
- Take photos of closets and drawers to document shoes and clothing, make note of any items that are above the average price for similar items
- Make a list of valuable items (typically any one piece over $10,000) and share that with your agent. Some homeowner policies may require valuable items to be scheduled on your policy to qualify for replacement.
- Use an app. There are several apps designed to develop a home inventory for insurance purposes but depending on how detailed you get this can be a big time investment.
Typically, personal property is given a limit equal to 50% of the Coverage A limit (the limit to reconstruct the home). You may want to ask your agent to discuss those limits with you so that you understand if have enough coverage. With inflation, everything costs more than it did a year ago, and it’s estimated that 2 out of 3 Americans are underinsured when it comes to protecting their homes and personal property. Another important aspect to discuss with your agent is how losses are settled. Would your property be replaced with new items, or does your policy settle losses by calculating the Actual Cash Value of the items? ACV is figured by taking the original cost, then subtracting depreciation. If that’s the case, the amount you’d get to replace your 3-year-old TV wouldn’t buy a new TV today. These gaps in coverage can certainly save you money on your premiums but end up being costly in the event of a loss. Knowledge is power, and understanding what coverages are available and the price of those coverages can help you make decisions about what to insure and how so there aren’t surprises in the event of a loss.