HOUSEHOLD
and
Personal Property
Inventory
Book
Circular
1346
This publication was
prepared by Holly Hunts, Extension specialist, consumer and family economics,
and Brenda Cude, Extension specialist, consumer and family economics, Division
of Agricultural and Consumer Economics, College of Agricultural, Consumer and
Environmental Sciences, University of Illinois at Urbana-Champaign.
University of Illinois at Urbana-Champaign
Authors and publishers have granted
permission for copies of this work or parts of this work to be reproduced,
provided that (1) copies are distributed at or below the cost of reproduction;
(2) the author, the publication, and the University of Illinois College of
Agricultural, Consumer and Environmental Sciences and the relevant division
within the College are identified; and (3) proper notice of copyright is
affixed to each copy.
Copyright © 1997 by University of Illinois Board of Trustees.
Here’s another great resource
for putting crucial information where you need it–When you
need it.
HOUSEHOLD
And
Personal Property
Inventory
Book
In your mind’s eye, picture your bedroom.
Now imagine that a fire has destroyed everything in it. How many of your possessions
could you name and describe accurately when the insurance adjuster asked for a
list?
No one likes to think about experiencing a
household disaster, but taking stock of the items you own is wise protection.
Should you face a theft, fire, flood, earthquake, tornado, or other natural
disaster, having a complete and accurate accounting of your household
furnishings and personal possessions will be quite useful in settling insurance
claims and documenting losses for tax purposes.
Household inventories are important in
other circumstances, too. By listing
the items you own, the dates you bought them, and their original prices or
monetary values, you will create an inventory that can help you:
- indicate the monetary value of your
belongings for a net worth statement,
- provide proof of ownership in the case
of separation or divorce, and
- decide how much insurance to carry on
household goods.
What’s a Net Worth Statement?
A net worth statement
gives a picture of a person’s or family’s financial well-being. The statement
lists all assets (items owned plus savings and investments) and all liabilities
(debts). A net worth statement is an important step in determining appropriate
financial goals, both short-range and long-term. A household inventory
contributes to the net worth statement as a tool for evaluating personal
assets.
Other Reasons for Having an Inventory
Few newlyweds actively
prepare for a divorce, but divorce has become a fact of life for many. A
household inventory can be created before a marriage and used as part of a
prenuptial agreement, or it can be compiled later and used in the legal
settlement process. An inventory can also be useful when an estate is being
settled after someone’s death. Accurate records of the worth of items make
equitable distribution more feasible.
Homeowners Insurance
Most homeowners insurance
policies cover two independent aspects of coverage: property protection and
liability protection. Property protection pays for actual damage to a home or
other structures (like a free-standing garage or storage area), damage to
personal property, and costs associated with the loss of a home (such as
increased food or lodging expenses if you cannot live in your house). Liability protection pays when you are
legally responsible for another person’s bodily injury or property damage.
When you talk to a
homeowners insurance agent, you will be given a choice of policies, from very
basic to deluxe. The more “deluxe” a policy, the more protection it provides
(and the more it costs). For example, a very basic policy may not protect you
if your pipes freeze and burst in the winter. A more expensive, deluxe policy
would probably cover these occurrences.
Sometimes a deluxe policy is called an “all-risk” policy, but this does not mean that it protects
you in every case of damage. It means that you are protected from all risks except
those specifically excluded. In
Illinois, some of a homeowner’s most pertinent risks are excluded from all-risk
policies, including flooding, sewage back-up, earth- quakes, and mine
subsidence. Ask your insurance agent exactly what is covered and to explain the details of special policies,
or “endorsements,” to cover risks that are not covered.
Renters insurance (for
consumers who rent rather than own their living quarters) is a form of
homeowners insurance; it too has both property and liability coveages.
Homeowners with mortgages are generally required to own insurance, but renters
are not.
Some renters believe that
the landlord’s insurance will cover their personal property in case of a loss.
It does not! The landlord’s insurance is for the structure only, not the personal belongings inside. Only about one in four renters protects
himself with renters insurance.
All renters, however,
need to consider the financial loss they will face without insurance in the
event of a theft, fire, or other disaster, or if their negligence causes bodily
injury to another person or damage to another person’s property.
How Much Insurance Do I Need?
Most homeowners insurance policies automatically cover personal
property for up to 50 percent of the coverage on the home. For example, if your
homeowners policy has $80,000 worth of coverage for your building, you
automatically have an additional $40,000 to cover the cost of replacing your
personal property. Will your coverage be enough to actually replace your
damaged possessions with new ones?
Without a complete household inventory, it is nearly impossible to know.
Your inventory lets you sum up the value of all your household goods and helps
you make sure you have adequate insurance coverage for them.
.
So What Are My Goods Worth?
You need to be familiar with several important insurance terms when calculating the value of your household items. In the inventory worksheets (starting on page 6), there are three columns related to price: original cost, replacement cost, and actual cash value.
- Original cost: How much you
paid for an item.
- Replacement cost: How much
you would have to pay to replace the item with a new one today. Typically,
but not always, this cost is higher than the original cost.
- Actual cash value: There is
not a hard and fast rule on how to calculate ACV, but most insurance
companies use the following definition: How much the item would cost new,
minus the amount it has “depreciated” (decreased in value due to age, wear
and tear, or obsolescence). The depreciation percentage is how long you had
the item compared to its expected life.
Let’s look at an example
to help bring the three terms to life:
Say you bought a new sofa
four years ago for $1,000. Its expected life is 10 years. This year you had a
fire, and the sofa was destroyed. The depreciation is how long you had the item
(4 years) compared to its expected life (10 years): 4 years divided by 10 years
is .4, or 40% depreciation. A new sofa now costs $1,200, so 40% depreciation is
$480 (depreciation is calculated as a percentage of the replacement cost, not
the purchase price).
So in this example:
- The original cost (what
you paid new) is $1,000.
- The replacement cost (what
you must pay new today) is $1,200.
- The actual cash value is
$720, calculated by subtracting the amount of depreciation ($480) from the
replacement cost ($1,200).
A term that can cause
confusion is market value, which is really a real estate term and not an
insurance term at all. If the term market value does come up, it is likely to
be used as the “garage-sale value” or the original cost minus the amount of
depreciation, which for the sofa would yield $600 ($1,000 minus $400).
Market value, however, is
not included on the inventory worksheets because you cannot purchase insurance
for market value of personal property. Most insurance companies let you insure
your property either for its replacement cost or for its actual cash value. It
is more expensive to insure property for its replacement cost, but in the event
of a loss you will have enough coverage to replace all of the items that you
owned.
Keeping Your Inventory Safe
Once you have completed your inventory, keep it, receipts, and any
photos or videos you have produced in a safe place outside of your house (so it
doesn’t disappear if you face a loss!). A safe deposit box is one good spot.
Make a photocopy of your inventory to keep at home so that you can update it as
you buy new items. Make sure you have enough insurance to cover these new
items.
After A Loss
Now, do these three things before you do anything else.
- Take a photo of the way
things look before you start cleaning up.
- Protect your property from
further damage by moving items to a safer place, boarding up windows, and
patching holes in walls or roofs.
- Keep receipts for items you
bought to clean or protect your property (such as tarpaulins, plywood,
etc.). Many policies will reimburse you for these costs.
Don’t dispose of anything until your insurance representative gives you the okay.
The Claim Process
If you have suffered a
loss from theft, fire, or natural disaster, you are probably experiencing some
degree of trauma. This section should help you take the necessary steps to get
back on your feet.
Contact your insurance
agent first. Eventually, you may be working with a claims adjuster or other
insurance representative, but your agent is your first and best link to your
insurance company. If you can’t reach your insurance agent, call the insurance
company directly and ask to speak to someone in the claims department. If your
property is unlivable, post a forwarding phone number so your insurance company
knows where to reach you.
You will probably need to
fill out a claim report (sometimes called a proof-of-loss form). Because this
inventory was designed to be very similar to the claim reports used by major
insurance companies, filling out these forms should be a breeze with the use of
this completed book. The company representative assigned to your case may
examine your damaged items and prepare a report for the company. Check the
report to make sure it is accurate.
The Settlement
Your insurance company will probably divide your claim payments
into three distinct parts:
(1)
for the dwelling structure itself,
(2)
for your personal property, and
(3)
for additional living expenses you incur because you cannot live
in your home.
You will probably need to
hire a contractor to repair the damage to the house. Be sure to choose a
reputable person and be wary! Con artists come out of the woodwork after a
major disaster. Your State Attorney General’s office and your local Cooperative
Extension office have tips on how to choose a reputable contractor.
The settlement for your
personal property will be based on either the actual cash value or the
replacement cost of your lost or damaged property. If you bought replacement
cost coverage, you may receive a check for the actual cash value first. As you
replace the damaged property, show the insurance company representative your
receipts. The company will then reimburse you for the difference between the
actual cash value and the replacement cost.
If you have additional
living expense coverage as part of your policy, be sure to keep receipts of
extra living costs you are incurring due to the loss of your home (for example,
a hotel room). Ask your company for details on the amount they will reimburse
you and where and how long you can stay.
For an excellent source
of information about insurance claim procedures, call the Illinois Department
of Insurance at (217)782-4515 or (312)814-2420. Ask for their free fact sheet, When
Disaster Strikes: What to Do After an Insured Homeowners Loss. Or look for
the text of this fact sheet on the Department of Insurance Internet home page:
If You Are Uninsured
It’s still a good idea to fill out a household inventory list. It can help you secure grants or loans and be helpful in claiming casualty losses on your income tax returns. There are a variety of services available to uninsured victims. So be sure to do your homework and find out what’s available to you. Clearly, though, the best way to protect yourself is by buying insurance before a disaster occurs.
References
Bauer, R.A., B. A. Trent, and P.B. DuMontelle. 1993. Mine
Subsidence in Illinois: Facts for Homeowners.
Environmental Geology 144. Illinois State Geological Survey.
Cham-paign, Illinois.
Federal Emergency Management Agency. 1992. FIA -2. Answers to
Questions About the National Flood Insurance Program. Federal Emergency
Management Agency. Washington, D.C.
Garman, T., and R. Forgue. 1994.
Personal Finance. Boston: Houghton Mifflin.
Illinois Department of Insurance. 1995. When Disaster Strikes:
What to Do After an Insured Homeowners Loss. Springfield, Illinois.
This inventory is an adaptation of the household inventory developed by Barbara Rowe and Holly Hunts in response to the Great Flood of 1993.
