When a hurricane or other natural disaster strikes, a home inventory can make all the difference in ensuring your home insurance company fairly compensates you for your losses. Few people can identify every single item in their homes — let alone the value.
A home inventory creates a permanent record of what you own and how much it's worth.
"It is not until someone is faced with filing an insurance claim that reality sets in. Unfortunately, it is nearly impossible to recall all of your belongings from memory alone," says Melton Bennett, president of the American Contents Inventory. "In basic terms, you can't claim it if you can't name it. Insurance doesn't automatically write a check for the face amount of your insurance policy."
The nonprofit Insurance Information Institute says a home inventory can help you:
- Get your insurance claim settled faster.
- Verify losses for your income tax return.
- Keep track of all the things you've accumulated over the years.
- Buy the amount of home insurance you need.
According to the National Association of Insurance Commissioners, nearly half of Americans don't have an inventory of their household possessions. Of those who do, close to one-third don't have photos of the items and 58 percent don't have sales receipts.
Having proof of how much you paid for an item can help you obtain as much money as possible for that item if it's lost in a fire or another covered disaster, experts say. If you have a "replacement cost" policy, you'll be able to get the full amount of money needed to replace a lost item. But if you have an "actual cash value" policy, the value of a lost item will be depreciated.
"Many consumers are not able to recover after a disaster because they don't realize how depreciation can impact their assets. The difference could be thousands of dollars," Kansas Insurance Commissioner Sandy Praeger says.
Basics of a home inventory
Experts say creating a home inventory doesn't take that much time and is well worth the trouble if you ever need to file a home insurance claim. If you have to mentally walk through your home and try to recall all of your possessions after your home has been damaged or destroyed, you're likely to forget some of them.
“One interesting thing I’ve seen from experience with fires is that people can’t often remember everything they had. Do you know every single thing you have in your home and garage?” says Jerry Davies, a spokesman for Farmers Insurance.
Experts say a home inventory should include:
- A comprehensive list of all of the items in your home.
- Descriptions of every item, including the estimated value and the date you acquired it. If possible, include sales receipts for big-ticket items.
- A photo of each item.
- A video walk-through of your home.
The Insurance Information Institute suggests recording items room by room, category by category (such as furniture or electronics), from newest items to oldest, or from most expensive to less expensive.
"It may seem hard at first to record information about everything you have in your house, but do not let that put you off," the institute says.
Your home inventory should be stored digitally and away from your house, experts say. You should maintain a copy of your inventory on an online data-storage service and email a copy of it to yourself. You also may want to stash a copy of your home inventory in a fireproof safe or a bank safe-deposit box, the insurance commissioners group says, as well as share a copy with your insurance agent.
"A home inventory serves no purpose if it is lost in a disaster,” Davies says.
Use technology to document your home inventory
Fortunately, today’s technology makes it easier than ever to create a home inventory. The National Association of Insurance Commissioners and the Insurance Information Institute both offer free smartphone apps that simplify the process. A smartphone also can come in handy for taking video of your belongings.
Of course, you also can go the old-fashioned route: Put everything on paper. Most major home insurance companies provide free booklets for home inventories. Or a simple notebook may do the trick. The National Association of Insurance Commissioners offers a printable home-inventory checklist online.
When you're conducting a home inventory, document everything. Don't overlook items that may not be in plain sight, such as your grandfather's shotgun, your old wedding dress or your massive coin collection. Keep in mind that you may need to buy extra coverage for high-value items.
Your home inventory should be updated once a year and whenever you make a big purchase.
Editor's Note: This is an updated version of an article originally published on Nov. 23, 2011.