Let's face it, life is unpredictable and can throw you curve balls left and right. Unfortunately, many of us aren't prepared when disaster — in the form of a house fire or theft — strikes. Many people assume their homeowner's insurance will cover everything lost in such an event, but that isn't the case, as they often don't have enough evidence to prove ownership. This is why having a comprehensive home inventory is so important. It provides valuable documentation if something ever happens to your property and possessions. Below we'll discuss why keeping track of what you own is essential for every homeowner — from protecting yourself financially against theft or loss to providing peace of mind when unexpected events occur.
A home inventory is an invaluable tool in those unfortunate circumstances when you must make an insurance claim or are compelled to prove loss due to theft or damage. An accurate record of what you own and its value makes it easier to recover the full measure of losses that have been incurred, as often the monetary value of the lost property will be greater than what one remembers.
To start, it is helpful to know what is covered by your policy. Homeowner's insurance policies safeguard your residence in four main ways:
Structural. If your home is damaged by a disaster — like a hurricane, fire or lightning — your homeowner's policy will help pay for repairs.
Liability. If someone visiting your house is injured while on your property, this coverage will help protect you. This coverage can also be a lifesaver if you're found to have caused harm to another person's body or property while away from your home.
Additional living expenses. After a covered disaster, like a house or wildfire, your home may become uninhabitable. This coverage helps cover the cost of your short-term living expenses while repairs on your house take place.
Personal belongings. Homeowner's insurance can help pay to replace stolen or damaged items after a burglary or insured disaster, such as those mentioned above.
Regarding your personal belongings, most standard homeowner's insurance policies cover the loss minus the deductible. Covered items typically include:
- Electronics
- Appliances
- Furniture
- Bicycles
- Clothing
- Lawn-care equipment
- Exterior plants and shrubs
How much you can recover after a loss
Most insurance companies use one of these two methods to reimburse you for any loss of personal belongings:
Actual cash value (ACV) — This option takes into consideration the depreciated value of the item at the time it was damaged or stolen. For example, a two-year-old laptop that cost $3,000 new may only be worth $1,900 today.
Replacement cost. Alternatively, this option focuses on the amount necessary to replace a lost or damaged item. Your laptop might only be worth $1,900 today, but the cost to replace it is $3,000; therefore, you would receive $3,000 to replace the laptop.
This is an important factor to consider when purchasing your home insurance. Only receiving the ACV will most likely mean you cannot replace your lost or damaged personal belongings without spending additional money. No matter which option you chose, neither of them will do their job correctly without a suitable home inventory.
Why you need a home photo and video inventory
A home photo and video inventory can give you peace of mind during a crisis. Photos and videos serve as important documents in the event of an insurance claim after a tragedy or disaster. The first thing your insurance company will ask for after you suffer a property loss is a detailed list of everything damaged or stolen.
While a written list of everything you own is a great start, you can easily create your home inventory with videos and photos. Start by walking through your rooms and organizing your items into categories, such as furniture, art, electronics, musical instruments, clothing, etc. Doing this helps you see what is worth documenting, as you may want to prioritize high-value or difficult-to-replace items. Doing this will provide evidence and support if the need arises when filing an insurance claim, which gives yourself one less thing to worry about during a time of turmoil.
There are some tools available to help you set up your home inventory. A popular resource is the National Association of Insurance Commissioners (NAIC) Home Inventory App, which is available for both Apple and Android devices.
Having a home inventory is an important part of being a homeowner. Creating one may take some time, but it can be especially helpful in the event of a disaster or theft. Being prepared ahead of time gives you one less thing to worry about and can help make filing an insurance claim easier.