Before you take out a renters’ insurance policy, take time to determine the value of your belongings. Reports from the insurance industry show the vast majority of tenants massively underestimate the value of their possessions.
Miscalculating your personal possessions’ value hurts you in several ways. For instance, it causes you to choose less coverage than you actually need if you select a cash value policy rather than a replacement value policy.
In addition, policyholders who undervalue their possessions receive less money than is required to restore their property and recover their standards of living. Protect yourself from these issues by completing a personal property appraisal prior to selecting your renters’ insurance policy. Find out more in the following sections.
Learn About Personal Property Appraisals
A personal property appraisal is an informed and detailed account of your belongings and their value, both as individual items and as a whole. Getting an appraisal is an essential step in the process of getting renters’ insurance.
Without an appraisal, neither you nor your insurer can accurately confirm the full contents of your home and the cost for replacing them if they become damaged or lost.
An appraisal consists of several steps. It often takes days or even weeks to complete a full appraisal. The time depends on the number of items you possess. Here are the steps you must take:
- Set up a spreadsheet. Record your belongings with any appropriate method that suits you but using a spreadsheet is strongly recommended. A spreadsheet easily allows you to update your information and requirements. Program a spreadsheet to do the calculations for you if you are not privy to doing the calculations on your own. This helps you avoid any mistakes and it saves you time in the long run. Organize your spreadsheet into categories for different items. It is useful to date the spreadsheet for reference purposes. It does not take long to set up a spreadsheet and it significantly improves your ability to record your belongings and determine their value.
- Take an inventory. Once you have set up your spreadsheet, make a list of all the items you and your family own. Make sure you record every possession. This means looking in the back of cupboards and through boxes in the attic to ensure you include every item. Make a special note of accessories, brand names and items’ special features. All of these details affect the value of an item. For instance, an off-the-peg suit costs less to replace than a high-end specially-tailor fitted suit.
- Get visuals. To prove what you own, use a camera or video recorder. By documenting your possessions visually, it makes a significant difference when the time comes to submit a claim to your insurer. Do not forget to record items that are packed away. It is easy to overlook seasonal items and heirlooms in the basement.
- Do some research. Once you have recorded all your items on the spreadsheet and you have documented them visually, determine what it would cost to replace each item. You may have to do some internet research for this step. If an item you own is no longer available to buy, use the price of a comparable item to determine its worth.
- Call an expert. This is not always necessary, but if you own high-end items like antiques and jewelry, it is best to have the items assessed by a professional. Typically, items worth more than $2,000 or $3,000 are evaluated by a professional appraiser. For possessions worth more than $5,000, you are usually required to attach the professional appraisal to the supplemental insurance rider.
- Make a copy of all documentation. The point of appraisal documentation is to have a record in case your belongings are damaged or lost. Do not solely keep a hardcopy of your appraisal information or a copy on just one computer. Your hardcopy or laptop could easily be one of the possessions that becomes damaged or lost. It is advisable to keep additional copies of your spreadsheet somewhere safe and to upload copies of the documentation to online storage sites.
- Schedule a time to review and update your spreadsheet. The possessions you own change over time. New ones are bought, and old ones are discarded. It is important to record these changes to make sure your spreadsheet inventory is up to date. Schedule a time every six months or at least every year to sit down and update the changes.
How to Establish the Value of Property
Determining the exact value of your possessions is tricky, though some general practices are recommended to help you come up with acceptable figures. If you know how much an item cost originally, use standard depreciation rates to figure out the remaining value.
This is particularly useful for large and expensive items. Online depreciation calculators are available for you to use for this process. Depreciation calculators are easy to operate. Simply enter the type of item, the date it was bought, its initial price and its present condition to receive an estimate of the item’s remaining value.
For smaller items like DVDs, books and household goods, you do not need to use a depreciation calculator. Simply look at the current replacement cost. Use retailers’ websites to find out how much it costs to buy a particular movie on DVD or a specific new book. For special item categories, use an authoritative guide like the Kelley Blue Book guide to used cars.
The process of documenting your possessions seems tedious, but it is important to remember why you are doing it and to pay attention to details. Different brands and styles of clothing, furnishings and accessories come with different price tags. It is important to note the exact type of items you own to ensure you are calculating the approximate value of each possession.
Do not overlook items that are not worth much money either. An old freestanding bookshelf might not cost much but if it is not included in your inventory, you must purchase a new one if it becomes damaged. If you have many items like this, the costs soon mount. This is why it is important to ensure you list absolutely everything you own on your spreadsheet.