Settlement wasn't near the amount needed

Kevin Hill, of Brown and Brown Insurance, answers a common question:

"I recently suffered a loss of personal property in my home. The settlement I received from my insurance company wasn’t near the full amount to replace the items. Why was that?"

The first reason could be the valuation method used for insuring the contents of your home. Many home owners’ policies cover the home on a replacement cost basis, but the contents on an “actual cash value” basis. That means that depreciation is taken into account when claim settlement is made.

If that isn’t the case, and replacement cost is being used, let’s look at a common assumption many insurance purchasers make. The home owners’ policy reflects coverage for personal property at a limit equal to 75% of the home’s insured value. The incorrect assumption is that the check will be cut for that amount. That is incorrect.

The insurance company will only pay for actual loss, the limit is just used as a rating cap during premium calculation. In order to determine what you will receive as payment, let’s look at the duties after a loss. The one most specifically relating to your question is:

“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.”

Failure to provide this inventory can result in absolving the company of paying any of the loss. It is highly encouraged that this inventory be completed PRIOR to the loss, and stored with any documentation in a fire proof safe, or away from your home or business.

If you have provided an inventory and the payment is less than the amount you turned in, documentation may be the key. Again, preparation in advance of the event would help in this situation.