Insurance 101: How to maximize a claim

By Denis Rowe AIC, SPPA, PCLS

Most individuals that suffered damage from the April 28th tornado are now “neck-deep” in their property insurance claims. A man I met in the not too distant past said it best when he said “I don’t want one nickel more than I am due from my insurance company, but I don’t want a nickel less either”. If you feel as he does then there are several things that you can do to legitimately maximize your settlement so that you don’t become a “victim” a second time by getting less than you are entitled from your insurance company.
First off, your adjuster probably gave you a “homework assignment”. That assignment was to list all of the items in your home that were lost or destroyed by the tornado. Your adjuster should have given you several pieces of paper in which to list these items. These are your inventory worksheets.
The requirements of your policy require you, at a minimum, to provide a description of the item, the quantity and the age of the item, and the cost to replace the item. Some policies also require you to list the place you purchased it, the date you acquired it and what you paid for it.
The most important thing that you can do to ensure that you get properly paid for your personal property is to patiently list each and every item that was destroyed or lost in the storm. It’s easy to remember and list the big pieces of furniture like couches, tables and chairs but where you can really short yourself is by being in a hurry and not listing all of the little items that make a house a home. Things like picture frames, vases, wastepaper baskets, spatulas, dolls, shower curtains, fishing gear, sewing needles, tools etc… . You have infinitely more of the smaller items in your home than larger ones and the sum total of all of the smaller things can frequently equal, or exceed, the cost of replacing all of the larger ones. If you are not naturally organized or detailed then you might want to consider hiring an inventory specialist to help you with this element of your claim as it will more than pay for itself.
Another area in the inventorying that I see policyholders make mistakes in is the pricing of the items. Almost all homeowners in the Louisville area have replacement cost coverage on their contents. That means that the insurance company will pay you the cost to replace any lost or totaled item at TODAY’S prices. If you put down what you paid for an item 5 or 10 years ago you will only be hurting yourself as you are owed what it would cost if you walked into a store and bought it today. Don’t guess at these prices, as you will need to be as exact as possible in your worksheet and provide documentation supporting the price you listed. And whatever you do, do not throw away any personal property unless you have been told by your adjuster in writing that it is okay to do so. Your policy requires that you make all damaged property available for inspection and violating this condition of your policy can cost you lots of money needlessly.
It’s also critical that as your refurnish your home and replenish your wardrobes that you keep each and every receipt. The reason why is that your insurance company is going to subtract from the Replacement Cost Value of an item a certain amount of money for depreciation. The amount of depreciation they apply to an item will depend primarily on the age and condition of the item. The amount of money remaining after depreciation is subtracted from the replacement cost is called the Actual Cash Value of an item. Your adjuster is only required to pay you the Actual Cash Value of an item until you REPLACE the item and can prove you replaced it. The only way to prove you replaced a damaged article is by sending them the receipt. Once you have proven that the item was replaced the adjuster will send you a check for the amount of depreciation they originally withheld. This can add up to a lot of money.
Let me give you an example: if you bought a dining room table ten years ago for $1,000 dollars it might cost you $1,500 dollars today to buy something of similar quality and likeness. The price you would list as the Replacement Cost would be $1,500. Your insurance company could say that since most ten-year old tables have nicks, scars, scrapes, scratches and stains that it would be reasonable to subtract $500 from that $1,500 for depreciation. This means that they would send you a check for $1,000, which is the Actual Cash Value of the table.
Once you spend $1,500 on a new dining room table and send the receipt to the insurance company proving that you have replaced the old dining room table they will send you a check for the $500 they originally withheld for depreciation. Again, they don’t owe you the full replacement cost until you actually replace the item.
I know it’s a daunting task to put together such a detailed inventory list. But if you will stay focused you can add thousands of dollars to your claim that you are legitimately entitled to. If the task is difficult or emotional then consider engaging someone who specializes in such work. It can provide you a great deal of peace of mind and allow you to focus on other more important things like your family.

Denis Rowe AIC, SPPA, PCLS is an insurance claims consultant with The Howarth Group (