Don't count on getting paid unless you can prove what you've lost.
Posted October 15, 2009
Insurance policies are very hard to understand. They are long, and that factor in itself deters us from reading them. They also speak a language that seems foreign. By the time you look up every unknown word in the dictionary, all comprehension of what you’re reading is lost. Because of this, many people just take it for granted that they have the proper, necessary coverage. Unfortunately, many find out too late—after they file a claim—that they are improperly or insufficiently insured.
One of the most common misunderstandings is about how insurance claims are paid for losses of personal property (contents of your house or apartment). People often tell me they believe that if they have a disaster, they’ll just get a check in the mail for the amount of their coverage.
This is not the case. Most insurance companies won’t just cut you a check without a list of the items you are seeking to have replaced. You’ll be asked to provide a detailed list of your loss, which needs to include each item, purchase price and when it was purchased. Usually, you’ll also be asked to state the manufacturer and model number or other description of electronics and appliances.
It’s not unusual to also be required to prove ownership to receive full replacement. For example, a stolen 42” television brought a theft victim only $400 because he couldn’t prove it was a big screen TV. Instead of receiving the true value of the stolen television, he received the amount his insurance company pays out for a ‘standard’ model (in his case, it was a 27” TV).
The Insurance Services Office provides the common language that is found in most insurance policies. Under the heading of Duties After Loss, you’ll find, “In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us.” Further, they continue, “Prepare an inventory of damaged personal property showing the quantity, description, actual cash value and amount of loss. Attach all bills, receipts and related documents that justify the figures in the inventory.”
An insurance agent explained this to me in common language. It means that they have no requirement to pay you anything if you don’t provide the information, documents and other proof they ask for!
I’ve not heard of anyone yet who hasn’t received any type of settlement, but I have talked to many who did not receive 100% of what they needed to properly recover. In fact, most state that their settlement was between 30% and 50% of the cost to replace their belongings.
Consider this—let’s say you have $100,000 in coverage. If your belongings are worth only $60,000, you will not receive $100,000. And, further, you won’t just receive a check for $60,000, either. You’ll be required to complete the list mentioned above before they’ll settle your claim. This proves how important it is to have an inventory of your belongings prepared before you need to file a claim. The investment in a personal property inventory is minimal compared to your potential loss.
Of course, there are always exceptions because every policy is different. Talk to your agent; ask questions. If he or she is too busy, or won’t take the time to help you understand your policy, it’s time to find a new agent! There are plenty of good, honest insurance agents with their customers’ best interest at heart.
Cindy Hartman is President of Hartman Inventory LLC, a woman-owned business that provides business and home inventory services for estate planning, estate settlement, financial planning, disaster recovery and more. Her website is HartmanInventory.com.