One Homeowner’s Tool You’re Probably Overlooking

Why do you have homeowners insurance? If you’re like many American homeowners, it’s not because you believe anything bad will ever happen to your property but because your mortgage lender or landlord says you must. You signed up for the policy and never gave it another thought. This is extremely dangerous.

Disasters can strike at any time. According to the National Fire Protection Association, U.S. fire departments respond to more than 360,000 home structure fires each year. Flood insurance claims average nearly $4 billion per year according to the National Flood Insurance Program. And Federal Bureau of Investigation statistics show there are more than 5,400 burglaries per day, 74 percent of which occur on residential properties.

Why You Need a Home Inventory

In the event of a theft, fire, flood or other natural disaster, your homeowners insurance may be all that stands between you and financial ruin. Protect your investments — don’t over look the home inventory. This detailed record of everything you own will come in handy should you ever need to file a claim, apply for disaster relief or document losses for tax purposes. Unfortunately, according to the National Association of Insurance Commissioners, 59 percent of U.S. consumers do not have one.

Creating your home inventory will take time, but the difference it can make in the event of a disaster is worth it. The actual process isn’t that difficult, especially if you follow these tips.

  1. Decide on an approach. You can conduct your home inventory room by room, by category of item, from newest to oldest purchase, or from most to least expensive belongings.
  1. Create your list. Spreadsheets are particularly effective for this purpose. You can customize columns as you wish, but make sure you include all information an insurance adjuster will need. This includes a description of each item, when you purchased it, the purchase price, and the brand and model or serial number. You can also use Know Your Stuff, free software available both online and as an app, from the Insurance Information Institute.
  1. Augment your documentation. If you have receipts or canceled checks to prove what you paid for your belongings, keep them. You can scan them if you’d prefer to store these items digitally. Photographs of important items may also prove helpful down the line. You can even make a video tour of your home, showing all of your belongings, to accompany your inventory list.
  1. Make sure you include everything of value. This includes items you use less regularly such as tools, sporting goods, holiday decorations and formalwear. Go through every closet, drawer and box in your home as well as your attic, basement and garage.
  1. Store your inventory in a safe place. Keep copies of the list and other documentation outside your home. Locations you may want to consider include a friend or relative’s house, your office or a safe deposit box. For even better protection, store copies in two locations.
  1. Update your list regularly. At minimum, update your home inventory annually. However, some homeowners find it easier to update their list as they make new purchases and the information and supporting documentation needed is readily available.

Once you’ve created your home inventory, review your insurance policy with your insurance agent to ensure you have adequate coverage. You should understand whether your belongings are insured for cash value (replacement or repair costs minus deprecation) or for replacement cost (replacement or repair without an adjustment for depreciation). Rare or valuable items may benefit from additional insurance riders.