Nowadays, buying homeowners insurance takes a lot more than simply telling an insurance agent how much you paid for your house, and then walking away.
Anxious to get things right from the outset, insurers may insist on seeing a more detailed site plan, particularly for higher-end homes, and might send out appraisers for a first-hand look at the property.
Aside from a walk through, particularly in older houses, some appraisers are using infrared cameras and moisture meters to spot water damage and fire risk — something that helps keep unpleasant surprises to a minimum.
That examination might also include checking to see if the gutters are cleaned or helmeted, whether the flashing is adequate and whether the grading on your property carries water away from the house.
The purpose of all this scrutiny is three-fold. First, it gives your broker or agent the basis for determining the best insurance coverage for you so that you're not over-insured, which is a waste of money, or under-insured, which is foolish in the extreme.
Secondly, insurance coverage appraisal reports serve as your record of value in the event of a loss and subsequent claim. These detailed documents generally focus on helping to estimate replacement value, which is the cost to restore a stolen, damaged or destroyed possession with one of similar quality.
Finally, getting things in writing provides the type of clear evidence you need to satisfy the "burden of proof" in the event of a claim. It also ensures that you and your adjuster/insurance company won't end up at an impasse on the value of both your home and your valuables.
Insurance policies have strict requirements that require you to back up your claim with proof. When filing a loss claim, you're expected to provide a complete inventory of items you've lost, along with the current value of each and every item.
When it comes to determining value, make sure you have your agent or broker go through your policy limitations in detail with you. They vary from insurance company to insurance company in terms of actual dollar amounts, the type of property and also whether the limitations apply to all types of losses, or just to certain types.
If disaster were to strike and all of the valuables in your home were stolen or damaged, would you be able to report the details accurately? Could you put your hands on supporting documentation such as receipts or invoices? Probably not — which is why, whether or not you have a formal appraisal, you should still be keeping track of things yourself.
You can't go wrong, for instance, photographing or videotaping all your valuables and recording the make, model and serial numbers of any electronic devices.
Once you've done that, transfer all of the digital photo files onto a CD or memory stick and keep this in a safe place. You may also want to take the pictures to a good commercial printer and get two sets of prints for easy reference.
There are several popular software packages on the market that can help you here.
The Insurance Information Institute's "Know Your Stuff" software, for instance, allows you to organize your possessions according to the room in which they're located and provides lists of items that are typically found in certain rooms as a prompt. It also has the capacity to store digital photographs.
When making a record of your possessions, it's essential to note expensive items such as jewelry, furs, collectables and other heirlooms since they may require additional coverage, according to the Institute.
But, it's also a good idea to make note of more commonplace items such as toys, clothing and even towels and linens, since the cost of replacing these items can really add up if you suffer a major disaster.
Keep copies of any store receipts, appraisals for coins or jewelry, and any other documentation needed to support the purchase and cost of major items in your home. Consider photocopying certain original receipts that may fade over time.
Although perhaps lacking in financial value, personal items such as photographs, wills, diplomas, etc. should all be stored in a secure place away from your home (e.g. in a safety deposit box).
One last thing: Keep your appraisals current. Some insurance companies won't accept an appraisal that is more than a few years old.
