Duties after a Loss: Home Inventory
Summary: When a loss occurs that involves contents, the carrier needs to know what contents have been damaged with an estimated value. An inventory of damaged items is generally required. As the contents of any household are accumulations of items over time, the creation of an inventory can be complex. This article reviews how to assist insureds in being prepared for damage to personal property.
Duties
All insurance policies list duties after a loss as part of the conditions of the policy. While some duties are always the same—to contact the insurer with information about the loss, for example—duties for different policy types may have some variances. Liability policies will require information as to injured parties, and property damage policies will require information about damaged property. The homeowners, tenant, and condominium policies all share some identical duties for property damage as follows:
5. Prepare an inventory of damaged personal property showing the quantity, description, actual cash value and amount of loss. Attach all bills, receipts and related documents that justify the figures in the inventory; 6. As often as we reasonably require:
a. Show the damaged property; b. Provide us with records and documents we request and permit us to make copies; and c. Submit to examination under oath, while not in the presence of another "insured", and sign the same;
7. Send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:
a. The time and cause of loss; b. The interests of all "insureds" and all others in the property involved and all liens on the property; c. Other insurance which may cover the loss; d. Changes in title or occupancy of the property during the term of the Policy; e. Specifications of damaged buildings and detailed repair estimates; f. The inventory of damaged personal property described in 5. above; and g. Receipts for additional living expenses incurred and records that support the fair rental value loss.
Analysis
The insured is required to prepare an inventory of damaged personal property showing quantity, description, actual cash value, and amount of loss. Bills, receipts, and related documents that justify the figures are required to be attached. The insured is to also show the damaged property and provide records and documents so the carrier can make copies. This inventory is to become part of the proof of loss. Receipts, bills, and related documents are important not just for verifying value of damaged property but for proving existence of destroyed or missing property.
The insured is also to submit to an examination under oath, while not in the presence of antoher insured, and sign the document if requested by the insurer. This is used by insurers to verify claims, and ensure that there is no fraudulent activity taking place.
An insured may have his residence broken into with many valuable objects stolen. Other than a broken window or door, there is nothing for the carrier to see. Receipts, bills, and perhaps photos may be the only proof the insured has that he owned a fifty-four inch HD television or that he had an expensive laptop, numerous DVDs and CDs, or an extensive collection of books,crystal, or other valuable items. The insured must account for his belongings and their value; he cannot just say the living room was destroyed and he had about $8,000 worth of property in it. In order to be efficient, the carrier needs the property listed, not just a pile of miscellaneous receipts and bills in a shoebox the insured hands over, he must create a list of the property.
Unfortunately, with certain losses such as hurricanes and wildfires, those receipts, pictures, and bills may be lost as well. The remains of the property can help establish what was lost to the extent that there are some remains; with fires much is completely destroyed, with storms much is washed away. This is why it's helpful for insured's to have an online inventory, but that does not help after the fact if they did not have one. Carriers may allow statements from others verifying existence of certain property; that will vary from carrier to carrier and situation. An insured may still be able to create an inventory of what was lost, but may not be able to substantiate it with documentation. Many carriers provide online inventory forms to assist in completing this task.
Most people underestimate the amount and value of the property they have and default to the standard percentage of coverage A on a homeowners policy or the minimum limit or not much more than that on a condo or tenants policy. People tend to think of the large items; the sofa, chairs, dining room table, coffee table, bed, dressers, televisions and computers. In reality, the insureds also have lamps, towels, photos, silverware, dishes, pots, pans, sheets, clothes, shoes, books, DVDs, CDs, cameras, tools, hanging pictures or art work, knick knacks, Keurigs, washer, dryer, microwave, vacuum, pots, and assorted other household goods. These things are often overlooked, and many find out after a loss that they were underinsured.
What Is an Inventory
The duties require an inventory showing quantity, description, actual cash value, and amount of loss. While at first this sounds readily doable, it is more complicated to create an inventory when an insured is under stress after a loss. This is one of the reasons why insureds should create an inventory when first applying for coverage and why it should be updated regularly.
An inventory can be neatly handwritten, on an Excel spreadsheet, on a form downloaded from the Internet, a detailed video of the insured's belongings from room to room, information added to an app, or some other form of record. What's important is that every item is accounted for and the inventory is very detailed. The policy asks for a description, quantity, actual cash value, and amount of all, with bills, receipts, and documents that justify the figures attached. Date purchased and purchase price are also helpful information to have and will assist in determining actual cash value.
But what is actual cash value and how is it determined? Actual cash value is the value of an item once depreciation has been accounted for. A ten-year-old sofa is not worth the same amount as a brand new sofa. To determine actual cash value, the expected life of the item, minus the current life of the item, divided by the expected life of the item is multiplied by the replacement cost. For example, a new leather sofa of the same make, style, and model is selling for $2,800. The sofa is five-years-old, and the life expectancy is ten years. The calculation is $2,800*(10-5)/10. Then $2,800*.5=$1,400 is the actual cash value. However, most insureds are unaware of the standard life expectancy of their property. Depreciation tables are available to assist the insured in determining the life expectancy of most any item, and some sites will calculate the amount for the insured once give the type of item, age, and replacement cost. Tables or calculators can be found at these sites:
Personal Property Depreciation
The Splitwise Furniture Calculator
Once created, a copy of the inventory should be given to the agent or put in a safety deposit box; somewhere offsite where it is retrievable after a loss. If the insured's important records are lost in a fire, there goes the inventory. Once retrieved, the inventory is likely to need adjusting; the sofa that was three years old when the insured created the inventory is now six years old; this is why a spreadsheet works so well in creating an inventory—the calculations can be built in so the insured can simply update the age and replacement cost and let the spreadsheet do the rest.
Building the Inventory
Building an inventory is a daunting task for everyone; however, the benefits far outweigh the hassle if a claim occurs. The first step is to pick a format; does the insured want to use an Excel spreadsheet, a smartphone app, something online, or a simple table? There are multiple ways an inventory can be built. There are many smartphone apps anyone can use, such as Encircle,Find my stuff:Home inventory, MyStuff, Sortly, NAIC Home Inventory, and others.
Once a format has been selected, the process of creating the inventory begins. Details are important: brand of item, date purchased, price paid for it, and current value. Apps will have ways to enter such information, and it can be entered when the photos are made or updated later. Have the insured determine when he will do this before he starts. Does he want to add detailed information as he goes or record photos and then enter data later? Either way he should be consistent throughout the creation of the inventory.
The best way is to work systematically; if taking photos or video, start at one end of a room and work around to the other side. Note lamps, hangings, pictures, carpet, and other floor coverings. What kind of frames hold the pictures? Are they from Target or were items custom framed? The cost will vary greatly. Note furniture: tables, chairs, desks, and stools. Is the furniture solid wood, leather, laminate, cloth, or some other composition? Open all drawers in desks, dressers, nightstands, cupboards, and closets.
Remember to go through the garage and attic as well. If the drawers are messy, the best practice would be to take items out of the drawer and photograph or videotape them—a picture of a drawer full of stuff does not adequately display the items and give a fair representation of what is actually in the drawer; items pile on top of other items, and a single picture of the drawer will miss many items.
Note electronic equipment and serial numbers. What make and model is the computer, printer, television, and video game console. Note office supplies: boxes of printer paper, envelopes, and stamps. If working on the computer and not photographing, proceed the same way. Note the manufacturer of each item and age, if known. It may be easier to look up items as you add them to the inventory instead of going back and adding details all at once, but that is up to the individual.
Quantity is important: how many place settings does the insured have of dishes and silverware? How many and what kind of serving dishes, pots, pans, glasses, and wine glasses? The manufacturer of these items is important; stemware can be expensive, and if an insured has a Baccarat set of stemware in the Massena pattern for twelve, that is $2,280 in stemware alone. If the insured has water, red wine, and white wine glasses, then the insured has $6,840 in stemware.
Likewise, the number of sheets, towels, dishrags, bedspreads, tablecloths, shirts, pants, socks, and any other items need to be documented. Toys, even for the pets, can add up. A peek-a-boo toy box can be $12.69, a chaser toy with a ball in a ring goes for $13.59, a fancy scratching post can be $59.99 and a cat tree can be as much as $200. Add in grooming supplies, pens, crates, fences, and carriers.
Any documentation such as receipts, bills of sale, or warranties should be attached to the inventory. Even without a bill of sale the warranty gives the make, model, and brand of the appliance, which the adjuster can easily work from. Not everyone will have documentation, which is why photos and video are so helpful—they show the item and its condition. If there are no receipts or warranties, even with pictures, a detailed description is important. Again serial numbers should be recorded, as well as make and model. Is the mixer 3.5, 5, or 6 quarts? What brand is the waffle iron, food processor, griddle, coffee pot, and blender? What attachments does the equipment have? The picture should show the attachments, and the description can detail the functions.
When You Don't Have an Inventory
But what if you didn't create an inventory before the storm? You didn't have time, didn't get around to it, life got in the way and you just never got to it. Now you've lost everything and the insurance company is asking you what you had. It's possible that if you've suffered a total loss they won't ask for an inventory and will write you a check for the policy limits; the insurer wants to restore people as soon as possible, and if your loss is part of a catastrophe this is entirely possible.
But what if it's not part of a catastrophe, or you've only had a partial loss, and the insurer is looking for a list? Again, working systematically is a good approach. Go room by room and visualize each room. Start at one corner and work systematically across the room. It may help to categorize items – start with the furniture, then what is on the furniture, then what is on the walls, then what is on the floor. That can help you recreate what you had.
You're doing this in a time of great stress. Try to pick a time to do this when you can sit down in a quiet area without the television or radio on and think through things. It's ok to go through a room a number of times to ensure you listed everything or as much as you can remember, and things may come to you later once you start the process. But being systematic will make it easier to put things together. Other family members can help too. If each family member makes a list, you have a better chance of listing everything you had.
Summary
While a lot of work, having an inventory of all personal property has numerous benefits. The insured can adequately determine the coverage needed for his personal property—it may be surprising once everything is added up. It documents possessions, so that in event of a loss the insured can readily provide the carrier with information it needs in order to quickly settle the loss. Creating the inventory with everything available is much easier than trying to remember everything an insured had after a loss when he is trying to clean up the dwelling and see what is left. An inventory given to the agent lets the agent know if there are items that should be specifically insured; the insured may not think anything about Grandma's table, but the agent may realize it could be an antique and may need special coverage. If the insured makes the point to update the inventory once a year, or whenever he purchases at least large or expensive items, he will always have adequate coverage for his belongs and be prepared in case a loss occurs.
Revisions: September 2022, August 5, 2016