Homeowner’s insurance can be among the most important investments you’ll ever make. With proper coverage, you can safe-guard what is probably your largest investment – your house – and all the things within its walls.

As devastating as it might be, just imagine what would happen if your home went up in flames this very afternoon. Beyond the things you’ll never replace, like pictures and heirlooms, there are countless other investments you will be forced to buy all over again. But how will you know what was there in the first place? Who assigns the value? How could you accomplish all of this in a situation as stressful as one where you lose everything?

At a time like this, it’s important to know you’re covered. This is precisely why it’s important to know all about your homeowner’s insurance, its coverages and its limitations before disaster strikes.

In an optimum situation, you will have purchased enough insurance to re-purchase the items you’ve lost which can be replaced. And again, in an optimum situation, you will have had the forethought to prepare a household inventory and left it in a safety deposit box or fireproof filing cabinet as well with copies stored with a family member.

In addition to creating a list with details, it’s also advised you walk room to room with a video camera and record everything, keeping copies of those recordings in safe spots too. (Doing all of these things beforehand don’t always happen, but when it does it’s a wonderful bonus.) If you have done it prior to a loss, you’ll also be able to get a good idea of whether what you currently have your contents covered for is sufficient. Most of us don’t truly know what it would cost to replace everything in our home down to every sock, so doing this before hand kills two birds with one stones—it allows you to know how much contents coverage you really need and determine whether your coverage is sufficient, and it also serves as a faster, more accurate way to determine what you’ve lost in a total loss.

If you don’t have an inventory beforehand, the insurance adjustor will ask you to prepare one after the loss. On any inventory list made, at anytime, you will want to detail each item as follows:

  • Describe the item (Dell Desktop computer)
  • Where did you get it – Purchased at Best Buy
  • Date item was purchased and approximate age – December, 2010 1 year
  • Value – $600.00
  • Replacement cost – $609.00

Of course, this sounds like a daunting task, and it is. The best way to begin is to go mentally from room to room and list the items you “see” there—again, much easier if you’ve recorded it all. Your adjuster will give you forms and you’d have to create the list from memory if you didn’t take inventory beforehand.

After you’ve determined how many bath towels you had in your linen closet and how many paperback books were in your family room bookshelf, you will begin the process of valuing your items. If you’ve just lost everything you own, how well do you think you could really remember all those things in that state of mind? That’s why it’s best to have this done previously—just in case.

One good way to accomplish this is to travel to a local Wal-Mart or Kmart and walk down each aisle making note of the (new) prices of those items you have listed. Of course, some items will not be available because they are obsolete – that VCR you got as a wedding present, for example. Nobody expects you to have receipts for everything and nobody expects you to do the impossible. When you’ve assigned a “replacement cost” for all the items on your inventory, you will turn that list over to the adjuster and your hard job will be over. The adjuster will do his/her work and you will eventually be able to begin the process of restoring your life.

Of course, if you’ve had the presence of mind to have most or all of your household goods inventoried and information about value saved safely away you’ll be ahead of the game. If you did not, a good time to begin a new inventory and make it easier in the future is to start one as you replace your items.

As you buy your new items, begin listing them on a new inventory in order to give you a beginning place in the unlikely event of future losses. If you do have to replace everything and started an inventory as you replace things, continue to update it and you’ll never again be left in the situation of having to wrack your brain if something happened in the future.

Photos and recordings of your belongings, furniture, jewelry, appliances and collector’s items are very helpful. Also, appraisals, if you’ve had them done, can be very helpful in the event of a loss.

As you create your new inventory, it’s an excellent time to review the replacement cost section of your insurance policy. If you realize, as many do, that you are under-insured, it’s a perfect time to increase your coverage.

Although some things can never be replaced—family heirlooms, little mementos like special books or photos, and things that have meaningful memories attached to them from your lifetime—you can have the weight off your shoulder knowing you’ve inventoried and accounted for everything in your home. After all, as the old adage says, you can replace things and not people, and no matter how sickening it can be to make such a property claim, it’s certainly easier to make than a life insurance claim.

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