According to the Insurance Information Institute, creating a home inventory allows you to do several things that help you in replacing your items in case of theft or a natural disaster. By having an inventory on hand, you can:
Purchase the home insurance you need in the right amount and discuss your insurance coverage with an agent more clearly. Doing so will also allow you to choose homeowners insurance or renters insurance products or services with a better understanding of the coverage limits.
File a claim, backing it up with a recording and documentation of your personal belongings,
Know what you can claim in replacement costs when struck by a storm, fire or similar catastrophe.
Also, by completing a home inventory list, you will have:
A record of your home's contents and their value
A record of serial numbers for your electronics and appliances
An indicator of whether your insurance coverage is sufficient
To make things simpler, you can use a home inventory app to capture pictures, descriptions, and serial numbers, and store the details electronically for safekeeping.
An app organizes personal belongings room by room and classification, and creates a back-up file to share, by email, with your insurance company.
Photos help you describe details more clearly or information difficult to describe on paper. Images help when you cannot get a sales receipt or you don't have a receipt for an item. Label each photo with a date stamp and include the pertinent data, including description, serial number (if applicable), and approximate value of each item.
You should revise your home inventory at least 3 times annually. Notify your insurance company about any new acquisitions so your insurance coverage stays up-to-date and covers you sufficiently.
The following tips will show you the best place to start and how to proceed with the home inventory process.
Before you record anything, clear out the clutter and organize your personal belongings so it is easier to record them.
Your home inventory should not only include the items in the main sections of the house, such as the kitchen, living room, bedrooms, bathrooms, and den, you need to include items stored in closets, pantries, the attic, garage, and basement. If you organize your things in each part of the house, you will find inventorying the items an easier task.
After you declutter and organize your stuff, begin by listing and recording recently purchased items. Add any information that shows the assessed value of an item, including where it was bought, the purchase price, and the item's make and model. Attach the sales receipt and keep a copy.
Record clothing items under general classifications, such as blouses, slacks, shirts, jeans, and shirts. Note any pieces that are valuable.
Record all the serial numbers of all electronics and appliances. You can locate these numbers on the back of the devices.
For big-ticket items, such as fine jewelry, collectibles, and artwork, check on special insurance coverage, as a regular policy covers items for a set amount, and you may need to buy additional protection.
Don't forget to include items you may have in a storage unit. These items can also be included on a renter's insurance policy or homeowner's insurance plan. For example, you can use the insurance to cover clothing, furniture, electronics, or appliances in case of a tornado, fire, or water leak. You can also cover the items for theft. Normally, the regular plans do not extend to floods or earthquakes. You need to take out additional coverage.
Make a paper inventory list and use a room-by-room app to record your items. Keep a copy of your paper inventory list document, plus appraisals, contracts, and sales receipts, in a safe deposit box. Make sure you understand how your inventory app works and back up the digital files. Archive the digital information in a storage account online or on an external drive.
After you record your home inventory, you need to learn how it will figure into making a claim, if needed. To understand this, you need to acquaint yourself with 3 key terms - "depreciation," "age value," (AV), and replacement cost.
Depreciation represents the loss in value from all causes, including wear-and-tear and age. When you submit an insurance claim, you need to prepare a detailed list of all the destroyed and damaged items, giving the value, approximate age, and replacement cost. Work with your insurance agent when you complete this list, so you stay on the same page.
An adjuster depreciates certain items, based on their age, giving the policyholder an actual cash value (ACV) for the lost inventory. If you take out an ACV policy, the insurance company owes you the difference of what it actually costs you for replacement and the ACV. This is subject to a policy's terms and limits.
Therefore, the ACV represents the former price of your personal belongings, or what a buyer would have paid you right before the event of the loss. Some insurance policies only limit their policies to the ACV, and that is all they will pay. If you have an ACV policy, you may have to request that the insurer take less depreciation on major items in your home inventory.
Given the hassle that claimants face in figuring ACV and depreciation, most of the policies sold to cover the replacement cost (RC) of a home inventory. To replace the items and receive the settlement, you need to send your receipts to the insurance company, including what they owe. By referring to an inventory list, you can make filing claims more streamlined and easy.
If you have a compilation of your home's inventory, the key takeaway is easier processing of your claim. Therefore, before you change policies or compare coverages, make sure you know what you have to claim in case disaster strikes and you need to file an insurance claim.
Your inventory list represents a convenient record and reference - one that you can refer to a natural disaster or water leak damages your items or someone steals them. When reviewing your personal belongings, again, you can file insurance claims easier by choosing a policy that provides replacement cost (RC) coverage vs ACV protection.
An ACV policy pays less money for older items in your home inventory than what you paid for them new. A replacement cost policy, as the name suggests, covers the cost to replace the items. While the premium for an RC policy runs about 10% more, it usually is worth it when filing a claim and figuring the settlement.
If you take out a flood insurance policy, however, you only have one choice. You have to buy a plan that covers the ACV for your personal belongings.
Review the limits of your coverage for expensive items in your inventory. If your home inventory includes personal belongings whose value goes above the limits of your regular policy, ask about buying a floater for your personal property or an endorsement. By adding the extra insurance, you can insure your more expensive items individually or collectively at a substantially higher limit of coverage.