Last month, United Policyholders was kind enough to invite me to participate in one of the plethora of webinars/seminars/workshops it hosts, one of many free resources it offers for insurance consumers. The main topic of the presentation was homeowners’ personal property claims. This topic has a special place in my heart since my first exposure to the insurance industry was doing contents inventories with my father growing up. The webinar was a great opportunity to hear lingering questions from policyholders impacted by California wildfires in previous years.
As a homeowner, recovering under your personal property coverage has the potential to be one of the most tedious and time-consuming aspects of your claim. Accordingly, the risk of leaving insurance proceeds otherwise owed, but unrecovered, is high due to fatigue and unfamiliarity with the process. Here are some tips to help maximize your claim and collect what you are owed:
Request a Full Copy of Your Policy and Know Your Limits
One of the first things you should be after a loss, subsequent to putting your insurer on notice and finding appropriate shelter, is request a full copy of your current policy.1 Make sure this includes all policy declarations and endorsements. Familiarize yourself with any endorsements that may impact the stated limits listed on your declaration page or consider retaining a professional to help you do so. Further, check whether you have any scheduled property and be mindful of any sublimits your policy may have.2
Use All Resources Available to Help Compile a Personal Property Inventory
For many losses, personal property may be lost, burned, or damaged beyond recognition. This may require compiling an inventory largely from memory. Unfortunately, our memories are often not as reliable as we may think, and this means leaving dollars on the table. Compiling an inventory list should be an ongoing process. Consider using the following techniques to refresh your memory of items you had in the home: ask friends and family for any photos they may have taken inside the home; go to a store you frequent (Target, Walmart, Costco, etc.) and walk the aisles; look at a wedding gift registry; request old bank records; ask if a store you’re a member of keeps a shopping history; use premade inventory lists as a guide;3 and keep a notepad in your pocket, or open a note on your phone so you can constantly add items you had as you recall them. Finally, remember that even the smaller dollar value items add up. Don’t forget to include items hidden away or stashed in a “junk drawer,” or you could be forfeiting hundreds or even thousands of dollars.
When Assigning Replacement Cost, Use Appropriate Pricing Methods
When valuing the Replacement Cost of damaged or lost property, avoid using a source where prices fluctuate. For instance, it is usually not recommended to use eBay pricing, unless you are trying to replace a unique item that can’t be found elsewhere. Further, avoiding using sale prices at stores. By the time you receive your insurance proceeds, the sale may be over, and you may no longer have the funds required to replace the item at full price.
Many homeowners policies are endorsed and pay for personal property on a Replacement Cost basis, or the cost to replace the item new. However, loss settlement provisions often dictate that only the Actual Cash Value is owed until an item is replaced. Actual Cash Value = Replacement Cost – Depreciation. Depreciation is the reduction of value in an item usually due to wear and tear. As a policyholder, it is important to understand that depreciation is negotiable. In California, for instance, an insurer must consider both age and condition of the property in making its depreciation determination.4 The policyholder, with superior information about the age and condition of the items, has the ability to push back against the unreasonable application depreciation. Depreciation guides can be used as a baseline to make an initial assessment of the reasonableness of the depreciation applied – United Policyholders offers examples for easy reference on their Depreciation Basics page.5 Finally, some items should not be subject to depreciation. For instance, antiques, jewelry, or other items generally known to hold their value or appreciate should not be subject to depreciation by an insurer.
Set Yourself Up Early to Recover the Depreciated Amounts
As noted above, to collect the depreciated amount (sometimes referred to as the holdback, or withheld monies), you often must replace the item and furnish proof of the purchase (e.g., with a receipt). From my experience, recovering holdback is one of the most common places policyholders leave money on the table throughout the insurance process. To set yourself up for success from the onset, and to easily track purchases and transactions, consider doing to the following:
- Use a folder or envelope to store all receipts of purchases of personal property following the loss (and scan them, if possible).
- Open a separate bank account with the personal property funds from your insurer – use only this account to purchase replacement personal property.
- Keep a diary of calls and emails with your adjuster regarding this aspect of your claim.
- When shopping for replacement personal property, bring the agreed upon estimate of personal property with you and compare items and price to maximize recovery.
Know Your Time Limit to Recover
Be aware of any time limit imposed on how long you have to recover the holdback. How this time limit is enforced varies from state to state. This time frame may be set out in your policy, but state law may adjust that timeframe. For instance, following a loss due to a state of emergency in California, a time period of less than 36 months may not be imposed to collect the holdback amounts from the date the first Actual Cash Value payment is made.6 It is good practice to put your insurer on notice that you intend to collect the holdback amounts and communicate your efforts to do so.
While the above are just a handful of tips to keep in mind immediately following a personal property loss, taking just a few steps in preparation of a potential loss can go a long way in avoiding a challenging claim process. Check this blog out for more tips on what you can do to prepare to tackle a personal property claim head on.
1 In California, an insurer shall provide to the insured, free of charge, a complete, current copy of his or her policy within 30 calendar days of receipt of a request from the insured. Cal. Ins. Code § 2071.
2 These may be listed under “Special Limits of Liability,” for instance, and include a $250 limit for money bank notes and coins, or $1,000 for comic books and trading cards.
4 10 Cal. Code Regs. § 2695.9(f)
6 Cal. Ins. Code § 2051.5(B)