#8 Do I Need an Inventory?
#8 Do I need an inventory of the contents of my home when I place a claim for the loss of the house and its contents in a wildfire?
Your insurance policy includes “Personal Property” coverage or protection usually calculated as a percentage of your dwelling coverage. Based on legislation passed after the Marshall Fire, insurers must pay you at least 65% of the covered limit without requiring an inventory if your home was lost in a governor-declared wildfire disaster. Accepting the 65% will save the hassle, at an already stressful time, of creating an inventory, but may leave money on the table. Preparing an inventory before disaster hits, and keeping it updated, is a good practice so that you can get fairly reimbursed for your losses.
More Details: Your insurance policy includes “Personal Property” protection, called Coverage C. It is common to calculate this as a percentage of your dwelling coverage. It represents the maximum amount you can recover for the loss of the contents of your home.
Every policy is different, including the percentage of the dwelling coverage that is your default personal property coverage. Most policies will not automatically cover items above a minimum amount ($500-1500+), and you may need to identify these items in a rider to the policy. Read your policy (the whole thing…not just the declarations page!) and discuss the details with your insurance agent or broker to understand whether there are limits on the amount you can claim in different categories (e.g., art, jewelry, etc.), and whether you will be paid based on the depreciated value of an item or the replacement cost. Consider an insurance rider that covers valuable items, especially anything that exceeds the cap.
When and if you need to make a claim following the loss of your home and its contents in a wildfire, a new Colorado law, passed after the Marshall Fire increases the amount your insurer will pay you (65%, up from 30% before this law) without an inventory, but only in cases of a governor-declared wildfire disaster.
Not going through the hassle of listing what was lost, when it was purchased and what it cost may be very appealing. But realize that you are potentially being underpaid for what you lost and the coverage that you have paid for.
For example, if your dwelling coverage is $1 million and your personal property coverage is 50% of that or $500,000, your insurer will pay you 65% of the $500,000 (or $325,000) without requiring documentation. You are leaving a potential $175,000 that you might be due on the table.
The alternative to accepting an insurance settlement based on a percentage is to complete an inventory of everything in your home after the loss, or to prepare an inventory before the loss. Insurance agents recommend that you complete an inventory and update it every 3-5 years. You should keep track of personal property items that exceed a cost of about $1500.
The inventory should be complete. By “contents,” we mean that everything that will fall out were your home turned upside down and shaken (depending on the insurer, things like carpeting and appliances might be considered part of the dwelling or personal property). There are many tools and apps that are readily available to make this process easier. Take photographs of especially valuable items and items that are in good shape but old enough that there is good reason to contest the depreciation applied by the insurer. A complete photographic record of the contents of your house (including what is in closets, drawers and cabinets) can help you when you need to document what has been lost. Be sure you store the photographs and inventory outside your house, and that you update it every few years.
You will find many on-line tools that will help you make an inventory. Choose one that will best help you complete this task.
United Policyholders has additional tips on making a personal property claim. Before you ever need to make a claim, it is very important that you understand and are comfortable with the terms of your policy.