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Is your policy good to go for wildfires?

Posted: August 13, 2008 7:15 p.m.
Updated: October 15, 2008 5:02 a.m.

Fire season: Are you prepared in the event of a disaster?

Most people would not be able to remember everything they own if they were asked to list them all out from memory. What would happen if they were destroyed by a fire?

Now is the time to prepare an up-to-date home inventory. The inventory will help you get the back-up information for your income tax return, the processing and settling of your insurance claim and help you determine if you have adequate homeowner's insurance coverage.

Start by making a list of what you own. Describe each item, the place and date of purchase, along with make and model. If you have the original sales receipt, contracts or appraisals, keep them in a file along with your list. Any major appliances and electronics have serial numbers.

For your personal items, such as clothing, keep the categories by items and keep an approximate count.

Make notes of items bearing higher values. When you make a significant purchase, add the information to your inventory while the details are fresh in your mind.

Overwhelming task

If you have lived in the same house for a long period of time, you probably have accumulated many items. The idea is that it is still better to have an incomplete list than none at all. The place to start is with your most recent purchases and work backwards.

The obvious items
Valuables like jewelry, artwork and collectibles may have increased in value since you obtained them. This is a good time to make sure you have adequate insurance for these items. Do you need a separate insurance rider for them?

One picture is worth ...
In addition to the lists, take photos of rooms, closets and drawers. Indicate on the back of the photos or in your computer a notation on the items you can see.

Like movies?
Walk through your house or apartment videotaping and describing the contents. Or do the same using a tape recorder.

Storing the list, photos
Regardless of how you do it (written list, computer, photos, videotape or audio tape), keep your inventory along with receipts in your safe deposit box or at any offsite location. That way you have your information available even if you cannot make it home to remove your valuable belongings.

Check your policy now
Insurance policies come in one of three options.

Actual cash value: Pays to replace your home or possessions minus a deduction for depreciation.

Replacement cost: Pays the cost of rebuilding/repairing your home or replacing your possessions without a deduction for depreciation.

Guaranteed or extended replacement cost: Offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild your home as it was before the fire or other disaster - even if it exceeds the policy limit.

This gives you protection against sudden increases in construction costs due to a shortage of building materials after a widespread disaster or other unexpected situations. Some insurance companies offer an extended, rather than a guaranteed replacement cost policy.

An extended policy pays a certain percentage over the limit to rebuild your home. Generally, it is 20 to 25 percent more than the limit of the policy. Check with your insurance agent as to your specific situation.

Julie M. Sturgeon is a certified public accountant in Valencia, specializing in individual and business tax issues. "It's Your Money" appears Thursdays and rotates between a handful of the valley's financial professionals. Her column represents her own views, and not necessarily those of The Signal.


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