Last winter one of my insureds lost their home to a fire. Their assumption was that since their policy provided a limit of $200,000 for their personal property inside, the insurance company would simply write a check for that amount. Wrong!
When a Glocester home was burglarized, the thieves took the homeowner’s jewelry. She assumed because she had purchased a “rider” providing up to $5,000 per piece of jewelry and $10,000 for all of her jewelry, that she would be going on a jewelry shopping spree. Wrong!
During the 2015 winter, an uninsured homeowner experienced lots of damage to his home from ice dams. After having it repaired, he assumed he would be able to at least “write off” the damage on his tax return. Maybe!
We’ve all heard horror stories about how one person “scored” when an insurance company paid excessively for a loss. We’ve also heard the opposite; where someone was paid peanuts. In most of those cases, it was not likely that one insurance company was better than another. It is usually the level of documentation the insured provided the company demonstrating what was lost.
Insurance companies are very sensitive to consumer satisfaction ratings as published by J.D Powers and Consumer Reports. Companies are also sensitive to legal requirements governing reasonable speed in paying your claim. Each serves to encourage a carrier to expediently pay your claim. But, they are obligated only to pay in accordance with the terms of your policy. When there is evidence a loss occurred (how did thieves get in?), documentation to support what was lost (what jewelry was taken) and an insurance policy that covers the respective loss, insurance companies are usually very quick to make good on your loss. The biggest delay is the speed in which you provide them with documentation.
It’s unlikely that you have managed to avoid the insurance commercial catch line “in 15 minutes or less…” I spend the better part of 15 minutes educating insureds on now documenting what they have. In each of the above situations, documentation was paramount to how much they were able to recover. My standard recommendation is to encourage customers to walk through their home with a video camera panning around every room, showing furniture, flooring, furnishings, opening closets, and drawers showing what’s inside. Arrange to do this with a friend or family member. When you’re done, swap the DVD or other media utilized. Store your video document at that family member’s home and you keep their’s; It’s unlikely that both homes will be lost at the same time!
How important is it to do that? Pick a room in your home. While not in that room, imagine listing 100 or more items without anything to remind you of what’s there. Now imagine doing this for your entire home. It is nearly impossible to compile a complete listing without the support of such documentation.
In the case of the couple who lost their home to fire, they thought the video documentary was a great idea; but never got to it. They did utilize three other resources to compile their “proof of loss” document. This couple had gotten married just two years prior. They obtained a copy of their gift registry from the stores they had been registered at. That list provided the items, the date of purchase, and the retail cost of each item.
Next, they then utilized the support of family and friends who had taken photos while visiting them over the last couple years. Those photos helped confirm the pre loss condition of the home, holiday decorations lost, and room by room furnishings.
The third resource they utilized were the dozens of photos I took early the morning of the fire. Before bureau draws swelled and froze in place, I documented, clothing in draws, clothes hanging in the closets, furnishings, and tools in the basement. The closet pictures showed their shirts, dresses, and suits. It showed shoes and shelf storage items. The closet discoloration demonstrated the broad reach of the heat and smoke. That heat would have softened or melted the nylon in the clothing. A sleek fitting dress would now fit like a plastic shopping bag. It all needed to be replaced. For the insurance company, all of the pictures documented what was there and its extent of damage. For the couple, it was a resource to jog their memory as they identified all that they had lost.
The family of the burglarized home was not so lucky. She had purchased much of her jewelry while on cruise vacations. She was without appraised values, purchase receipts, or even photographic documentation that she ever owned the jewelry. Compounding that, when she reported the break-in to the police, she failed to list any jewelry as having been stolen. The insurance company really challenged her to document what she had lost. When she provided a description of some items and their associated values, the insurance company exercised their option to secure those items through a discount jewelry exchange for her. She was very frustrated and I doubt she recovered the full value of her loss. In her case, simply laying out her jewelry and photographing it ahead of time, would have been an easy means of documenting the existence of the jewelry. It would not have provided an appraisal to maximize the financial value of her claim, but it would have left little doubt that the jewelry existed.
Having that video documentary can be helpful beyond supporting an insurance claim. When you sustain a “casualty loss”, Internal Revenue Service regulations allow you to write off the portion of the uninsured loss that exceeds 10% of your Adjusted Gross Income (AIG). But you must be prepared to prove what the pre loss condition was and that the expenses incurred were used to restore the home to the pre loss condition. Again, this is best done through photographic evidence. Through the existence of photographs, if needed, a licensed appraiser could show both the pre and post loss “Fair Market Value” of the home. The diminished value then becomes the deductible amount.
Rule of thumb: If you didn’t document it, it never existed