Total Loss of Contents versus Total Content Coverage. What Will I Be Paid?

Photo by Anna Nekrashevich on

In this example, let us say that your home is insured for $500,000.00 and your personal contents are insured for $100,000.00 and a fire has totally destroyed the building and its contents, reducing 100% of everything to a smoldering pile of ashes.  What was not destroyed by flame and smoke was finished off by the water from the hoses that extinguished the blaze.

In Missouri, you can expect to be paid the full value of your policy coverage for the building which is, in this case, a total cash amount of $500,000.00.  Personal contents, on the other hand, is a totally different story.

Unfortunately for many policyholders, it will not be until after a catastrophic loss that they will learn that a total loss of their contents does NOT necessarily result in being paid the full amount for which they insured their contents.

You will be required to provide a complete inventory of every item in the house, along with the age and replacement cost for each item.  Every piece of furniture, item of clothing, dish, bar of soap, box of band-aids, cotton ball, grocery item, jewelry item, tool, and content items claimed must be recorded by kind and quantify.

You will likely overlook many items that do not immediately come to mind as you put your list together from memory and the dollar value of what you can remember may be considerably less than the full amount that you insured your contents for.

After your inventory has been compiled, your insurer will take several weeks to review your list and depreciate each individual item by its age, and will award an amount equal to replacement cost for your contents – – – minus the amount of its depreciation.

Assuming you are able to remember everything you own, are able to prepare an inventory from memory, and find that it will cost $100,000.00 to replace these items, you will still only be paid the cost to replace them after subtracting for depreciation.  Some items can depreciate from 25% to 50% per year, depending on the formula used by the insurance company.

Even if you have a full replacement policy that pays the full replacement cost for each content item lost, the first payment to you will be the depreciated value of the claimed content items and – after you purchase a replacement and provide a receipt proving that you paid to replace the item – you will receive a second check for the balance between what you were originally awarded and the actual price you paid to replace it.

Today … before the fire, tornado, or flood … is the time for you to begin to document the contents of your home.  Use photographs or video as you open every drawer, look at every shelf in the closet, through every box in the basement, every cabinet in the kitchen and garage, and so on.  Store this written, photographed or video recorded inventory somewhere other than inside your home so that it will be accessible after your loss.

Even though your contents are insured, it will still be your burden to prove that they were present and what they were worth.  Following a catastrophic and traumatic loss that destroys everything you own, your ability to recall these details is likely to be extremely impaired.

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