Determining the value of a household’s personal possessions is an essential part of purchasing renters insurance.
According to national studies and insurance industry reports, the vast majority of renters grossly underestimate the value of their belongings. Miscalculating their possessions’ worth can severely hurt renters in several ways. It may lead them to select less coverage than they truly need (e.g. actual cash value policies rather than replacement value policies or overly high deductibles). If a storm or other emergency causes significant damage or losses force renters to replace their things using the funds from an insurance payout, then policyholders who undervalued their belongings may receive far less money than they need to restore their homes and property to their former standards of living.
Renters can protect themselves from these missteps by completing a personal property appraisal before or during their research and selection of renters insurance coverage.
A personal property appraisal is a detailed and informed accounting of an individual’s or family’s belongings and the value of those belongings, both independently and as a whole. Appraisals are an essential component of renters insurance. Without a proper appraisal, neither renters nor their insurance companies can accurately attest to the full contents of renters’ homes and the true costs of replacing all those items in the event that they are lost or damaged.
Appraisals are conducted in a series of steps. These steps do not have to be completed all at once. In fact, it may take several days or weeks to fully complete an appraisal, depending on the number and types of items a household owns.
Determining the exact value of personal belongings can be tricky. However, there are a few generally agreed-upon practices that renters can use to reach an acceptable figure.
Renters who know how much an item initially cost may be able to use standard accounting depreciation rates to assess remaining value. Online depreciation calculators significantly simplify this process. For example, if a renter purchased furniture for $2,000 two years ago, then he or she could enter the type of furniture, its purchase date, its original cost and its current condition into a depreciation calculator and receive an estimate of its remaining value. Learn how to find inexpensive furniture and decoration here.
Smaller items and commodities can most efficiently be appraised by looking at their replacement costs. For example, books, DVDs and household goods have fairly standard pricing. Renters can use retailers’ websites to look up how much it would cost to buy a new copy of a particular book or DVD and use those figures for the value of their existing copies. For some categories of items, renters may find that comprehensive authoritative guides exist. A well-known example of this is the Kelley Blue Book guide to used car values.
Renters taking stock of their possessions should keep in mind that although the process may seem tedious at times, it is critically important to stay engaged and pay attention to details. As noted above, different styles and brands of clothing, accessories and furnishings can have very different price points. Unless higher-cost pieces are explicitly documented as such, renters can expect to only receive the value of a comparable, non-brand-name item in the event of a payout.
Additionally, renters should intentionally take note of furniture and other organizing tools that are often easily overlooked. For example, an entertainment station holding a family’s electronics, the dresser holding a renter’s clothes and the freestanding bookshelf housing books and collectibles are just as likely to sustain damage in an emergency as the items they hold. Even if they do not seem particularly expensive, renters can expect to have to replace items not listed and accounted for out-of-pocket in an emergency since renters insurance may not cover items undocumented.
Finally, renters are strongly encouraged to review and update their personal property assessments whenever they make significant new purchases. Periodic (e.g. annual) reviews of their master appraisal spreadsheets are also recommended, as regular updating makes it easier to retrieve and use crucial asset information in the event that a renter needs to file a claim.