Calculating Your Personal Property Value for Home Insurance
When shopping for home insurance, you will generally be asked to provide an estimate of the value of your home and its contents. This is so the insurance company can calculate the cost of your monthly premiums based on the value of your overall insurance policy. While this may sound like a simple task, there are many additional factors to consider. To help ensure that your home and assets are adequately insured, here are a few tips to help you when calculating the value of your personal property.
Make an Inventory List
Most people aren’t really aware of all they own. Regardless of whether you are a tenant in an apartment building or a private home owner, making an inventory list is the first step to ensuring you are adequately covered. Draw up a spreadsheet and have a section for each room. Make several columns with headings such as: Item, Description, Acquisition cost, and Replacement cost. Start in your bedroom and list every single item. For example, “Item: Necklace; Description: 20 cm long thin gold chain with flower pendant; Acquisition cost: none – received as a gift; Replacement cost: $200.” Then move onto furniture, clothing, linen and ornaments. Most often, you will not be able to remember what you paid for a particular item or you may have simply inherited some items of furniture. You may also not be aware of what its current value is. Don’t be overly concerned about that at this stage. The important thing is to draw up a list. In this way, you can make sure that you account for all the items in your home. It is often difficult to record items after they have gone missing or been destroyed. It is much easier to make a record when you can still see all the items in your home.
Your Household Contents Are Not as Valuable as You Think
While many of the items in your home may have a sentimental value, they unfortunately may not have much real value. Think of when a neighbor has a garage sale. What sort of value would you expect to pay for used or old furniture and furnishings? In the same way, your bedside table that you inherited from your grandma may not be that valuable. The exception to this is antique items,; however, it is important to remember that just because an item is old does not mean it is a precious antique. An antique’s value is based on its design, rarity and era. If you think a piece of furniture could be an antique, find out as much as you can about it and then research it. You can also ask for an appraisal by an antique dealer, although these are seldom accurate.
Establish a Replacement Value for Your Home and Its Contents
Rather than the sale or purchase value of your assets, insurance is more interested in what it will cost to replace your valuables should they be lost, destroyed or stolen. For example, if you have a newly built home with a mortgage to pay off, your insurance value of your home should be enough to cover the cost of rebuilding plus interest due on the mortgage. It is also important to update your insurance in terms of current values. What it cost to build your home 10 years ago is not going to be the same value as what it will cost to rebuild the same home today or tomorrow. Because of inflation, building and maintenance costs escalate each year. While it is unlikely that you will ever receive the full replacement cost of your home, you can make every effort to make as accurate an estimate as possible when insuring your home.
One way to get a good indication of the market value of your home is to ask a real estate agent for an appraisal of your property. They will consider things such as location, age, construction methods, security and finishes. Some agents will charge a small fee to do the appraisal for you but it can be worth it to get a current market value of your property. Once you have that you can then add to it your inventory list of your household items to get the total insurance value of your home. Some insurance firms use formulas to estimate the true value of your home but these differ from company to company. When asking for quotes, it should be possible to establish what formula a company uses. This will then give you additional insight on how they value your home.
