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The Importance of a Home Inventory

BLOG, PERSONAL FINANCE  |  11 Jun 2015

(and adequate insurance coverage)

150611MassiveTornado1

I had just finished up a great round of golf at the Phoenician Resort in Scottsdale in April, when my phone started tweeting about Tornado Warnings. Since it was 87 and sunny where I was, I had to do a double take, but then realized they were for back home in Illinois. I texted my wife, Tammy and the kids and told them they needed to get downstairs if they haven’t already. They were not yet aware of the warnings and promptly went downstairs, even though our home in Roscoe was quite a distance from the tornado.

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(View of the next door neighbor’s house)

As I sat on the patio deck in Scottsdale, the televisions had the Weather Channel on and cut to live video of a huge tornado near Rochelle, just getting ready to cross I-39. This was massive, sort of like the huge tornados that hit Oklahoma and Kansas each year. I instantly got chills, as I knew this was heading towards my in-laws and nephews houses in Fairdale about 15 minutes northeast of Rochelle, and looked to be in the path of this monster. I called my wife again, and by now she had the T.V. on and saw the same video and she was on the phone warning her parents in Fairdale that they needed to get downstairs immediately, as the storm was bearing down on them.

My father-in-law, Raymond is 84, but is a very sprite 84, as he still farms 300 acres of corn and beans every year. They have lived in Fairdale since he built the house himself in the late 50’s; it is also the home where Tammy grew up. She called him and he had just got home from his daily “flip” at the restaurant in Kirkland (the flip is where several local farmers get together for coffee and flip coins to see who the lucky one is to pay the bill). She pleaded with him to get his butt to the basement and he assured her that he would get there. Luckily, my mother-in-law, Charlene was in Belvidere at the Moose Club for the weekly Thursday bingo.

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(A view of the side of Ray & Char’s house in Fairdale, the day after the storm.)

He never made it to the basement. Being the curious older gentlemen that he is, he was opening windows in the house, and was preparing to go out the front door to get a look at the tornado, but just as he was opening the front door, the storm hit, and blew him back from the door. He crawled behind the island in the kitchen as just about every window in the house blew out and trees fell through the roof. Luckily, one of the few windows that did not break was near him in the kitchen, so he did not sustain any injuries besides being visibly shaken up. He was very lucky, as every house around them was either destroyed to the foundation or just plain destroyed. Two of their neighbors a few houses down the street lost their lives. My two nephews’ house, which is a block away did not survive. Fortunately, they were both at work at ComEd.

Two days later when they finally allowed the residents and families back in, the site was surreal. Walking down the street, most of the neighbors houses were piles of rubble, all the trees were either gone or just trunks with everything else broken off. There was glass and nails everywhere. The small town which is only a couple of blocks in size was forever changed. Cars were overturned, there was a canoe wrapped around a tree like it was a piece of aluminum foil. Personal items and heirlooms were littered about the streets. Residents, family members and friends, cried and comforted each other.

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                                          (A view of Ray and Char’s neighbor’s house)

Once we got to Ray & Char’s house, it was clear we had a lot of work ahead of us. We were blessed that they have a somewhat large family and a lot of friends, many of which are contractors or farmers, thus we had access to a lot of heavy equipment that really made things a lot easier. For those not as lucky to have large contingents of family and friends, I cannot say enough about the hordes of volunteers that came from all over the country and donated time, muscle, food, and compassion. It was truly remarkable to see how all these people gave so much to help out people they may not even know. Groups like Samaritan’s Purse, Team Rubicon , The Red Cross and many others were such a big help to those down there. Many local businesses also chipped in to do what they could as well. And there were a lot of hungry volunteers and workers, that many local restaurants provided delicious meals for everyone.

150611FordPickUp5 (Ray’s Ford pickup is under here somewhere. Once we got it out, he drove it out of the driveway, but it did end up getting totaled.)

I don’t know if it was the craftsmanship that Ray put into his house that he built so many years ago, or they were just lucky (maybe a bit of both), but their house was pretty much the only house left standing in a 3 block radius. It sustained a fair amount of damage, the roof has to be totally replaced, and the inside pretty much gutted as fiberglass, nails and glass are embedded into almost everything. Most of their clothes and furniture were damaged or destroyed. But they are lucky, they have good insurance, and they are alive. Others nearby were not so lucky, as some lost lives, some had no or too little insurance on their house. This leads to the crux of this article about the importance of good records and a home inventory, as well as updating your home insurance to make sure your coverage is adequate.

My two nephew’s home which is a block away was declared a total loss and had to be torn down. They, had done a pretty good job knowing what the contents of their home and the value of the items, so they were able to get their detailed claim into the insurance company rather quickly. They had to live with us for a few weeks, but have managed to find a house in nearby Kirkland to rent until their new house is completed. Home insurance covers the cost of temporary residence until your home is repaired or rebuilt. We are still trying to sort out the claim for the personal items of Ray & Char’s home.

Why Take A Home Inventory?

Obviously, if your house is damaged by a tornado, it will make things much, much easier to file your insurance claim for damaged or destroyed property. But, it doesn’t have to be a tornado, it could be a fire, earthquake, flood or even a home burglary that may cause you to lose belongings. So what should you do? What is a good way to start? You can start by taking pictures, video, or both and making a list of items. The list could be primarily for larger and more expensive items, along with photos and video. If you have too many smaller items, just take pictures or video of the smaller items and keep them with the list of everything else. You will also want to try to note the age, and cost of each item if possible. There will also be plenty of items that you cannot put a value on such as family pictures and things like that. Keep the list and photos away from home, either at work, a friend’s house several miles away or a bank safe deposit box. Some insurance companies allow you to upload the information online in the cloud, so you may want to inquire about that. You will also need to update the inventory once a year or so, or when you make a large purchase. There are also apps available for your iPad or phone that make this process easier.

When we are doing financial plans with clients, we always put into our action plan an action items about having your important documents together in one place, such as a fireproof safe or the bank safe deposit box so that they are easily available after a disaster. If you are locating these items in a safe, you may want to consider making copies of them to keep in the cloud or elsewhere also. I wish I could tell you how much time this would have saved had my in-laws done a better job of this. We are still looking for things a couple of months later.

150611FootballPic6-200x300 (High School football picture of my son, Trent found several miles away from Ray & Char’s house in Fairdale on a Found Property from the Tornado Facebook page)

Make Sure your Home Insurance Coverage is Adequate

Be aware of what type of insurance coverage you have. Read your policy or speak with your agent if you are not sure, and get their input as to the type of coverage you should be carrying. Also, remember that insurance is not based so much on the market value of the property, buy what it would cost to rebuild the home today, including tear down and removal. So even though the market value of your home may have decreased, the cost of totally rebuilding it probably has not, so be careful not to reduce coverage because you believe market value has dropped. Also, the coverage for personal property contents is generally set at 50% of the amount of dwelling coverage, so a $300,000 insured dwelling would have $150,000 of coverage to replace contents. You can adjust this amount of contents coverage if needed, but that is where a home inventory comes in handy to tell you roughly how much the contents of your home are worth, and if you need to bump the contents coverage up.

There are 3 main types of homeowners insurance:

  1. Guaranteed Replacement Coverage – provides payment of 100% of all repair and rebuilding costs without limits. This is the Cadillac of insurance coverage. If you can afford it, this is the best coverage to have.
  2. Replacement Cost Coverage – This seems to be what most people have and it is not as costly as Guaranteed Replacement, but is the best coverage many insurance companies offer to homeowners due to the home’s location or condition. For most people, this coverage is good enough.
  3. Cash-Value Policy – This will cover the cost of the house’s replacement cost less any depreciation. You will not get enough money to completely rebuild with this type of policy.

If you can afford the first and are able to get it, this is the best coverage to get. Otherwise Replacement Cost coverage will suffice for most. Be careful of trying to cut costs too much and just buying the Cash-Value coverage. You may also want to make sure you have an Inflation rider included so that coverage increases with the rate of local building cost inflation. When you have replacement cost coverage you are required to insure for a minimum of 80% of the cost of replacement as determined by the insurance company. There is a site called HMFacts that many insurance companies use to determine the replacement cost of items. For a modest fee you can fill out a questionnaire on the particulars of your home and you will get a detailed report of the replacement cost that you can use in estimating the coverage needed for your home.

Also make sure you have adequate coverage for your jewelry, electronics, art, antiques and other valuables. There is an app for the iPhone/iPad, Microsoft and Android devices called KnowYourStuff.org The app is fairly easy to use and will help you get replacement cost values for these types of items that may not be covered with AccuCoverage.

The tornado was definitely a very traumatic experience for our family, and we consider ourselves lucky, that no one was hurt. Property can be replaced, but it sure makes life easier if you know what you have and can access it quickly if you need to because of a disaster.