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When I opened the recent invoice from my homeowners insurance provider, I was shocked. The annual premium had skyrocketed from $8,000 to $18,000. I called my agent, who confirmed there was no mistake. My premium had indeed jumped by $10,000 in just one year.
The agent suggested another company that could insure my home for $11,000 a year. Still stunned by the increase, I decided to do some research on my own. Eventually I found a company offering the same coverage, with $100,000 more in protection, for $3,500. That’s not a typo. It seemed too good to be true, yet the firm was State Farm, not some unknown and possibly unreliable company.
Switching companies, however, came with a caveat: I needed to inventory everything in my house, especially valuable items like jewelry and artwork.
This is a standard recommendation from both insurance agents and financial planners. If your home and/or its contents are destroyed or damaged by a disaster such as a fire or flood, the insurance company will need a complete list of what was lost. That requires making a detailed inventory of all your home’s contents, complete with proofs of purchase and serial numbers.
Do you have such a list? Is it stored securely outside your home? Do you update it annually? If so, congratulations—you’re a one-percenter! I estimate that probably 99% of homeowners don’t have such an inventory.
If you are among that 99%, the reason is probably more than simple procrastination. Chances are you feel confident that your total coverage is high enough to let you easily replace everything in your house.
This assumption could be dangerously wrong. Here’s why.
You might assume that ordinary belongings won’t cost much to replace. That’s not necessarily true. Have you checked recently on the prices of new stoves, refrigerators, washers, and dryers? What might it cost to replace all the tools you own? Or every utensil, dish, and small appliance in your kitchen? Or all your beds and bedding? The only way to know whether your insurance would cover that expense is by having an up-to-date inventory and a reasonable estimate of their replacement cost.
Or imagine that a fire damages part of your home, destroying the contents in just one section of it. How will you prove that your bed held an expensive luxury mattress? Or your exercise bike was a top-of-the-line brand and model? Or the contents of your china cabinet were valuable collectibles rather than generic knickknacks? It doesn’t matter that your insurance coverage is enough to replace these things if you can’t substantiate what you’ve lost.
Fortunately, today’s technology offers an easy way to document what you own. Just walk through the house with your phone and make a video. Be sure to record fixtures and wall hangings as well as furniture. Include the contents of closets, drawers, and boxes. Pay close attention to collections, antiques, and high-end items like china or silver tableware. Be sure to get serial numbers of big-ticket items. Don’t forget garages and garden sheds.
For expensive items like jewelry, artwork, or antiques that need to be insured separately, you will want appraisals. If you can’t find local appraisers, you might try sites like Value My Stuff, Mearto, and Heritage Auctions.
Store copies of the video and appraisals in multiple places, including the cloud and at least one flash drive kept outside your home.
Finally, remember to update your video annually. You might schedule this to coincide with the renewal notice on your homeowners insurance. And if that notice includes a drastic increase in your premium, research other options and companies before you renew.