Preparing a Personal Property Estimate

One of the policyholder's duties after a loss is to prepare a personal property estimate of damage. As a Florida Public Adjuster, I find it surprising  that most homeowners believe the insurance company is obligated to prepare this document for them. For the sake of this discussion, I will base all examples and opinions on the HO 00 03 04 91 policy with a Personal Property Replacement Cost, HO 04 90 04 91 endorsement. If your policy or endorsement contains different language, my comments may not be entirely applicable. Should you have difficulty preparing  a Personal Property Estimate, a public adjuster should be able to help.

Your Duty to Prepare a Personal Property Estimate

You are required to present a Personal Property insurance loss to your insurance company. While most policies do not insist that you utilize a certain form, they do demand that you provide specific information. Many policies state that you prepare an inventory of damaged personal property declaring four items: the quantity, description, actual cash value and amount of loss. Although you could hand-write this information and comply with the policy, I recommend that you present your claim in an orderly and understandable fashion, and this may mean using some type of Word or Excel Spreadsheet.

I have provided a one-page Contents Inventory form that my assist in the presentation of your claim. If you opt to use this form, it is very important that you confirm that the information contained on this form fully complies with all of your policy requirements. Remember, not all policies contain the same language, and some have more defined requirements than others. Should you wish to use a public adjuster to present your personal property loss to your insurance company, it is usually best to present the the description, age, condittion, and replacement cost of the items you are claiming on a Personal Property Worksheet.

How to get started

First, you should state the quantity of the damaged items.This at first seems pretty self explanatory. If you have 1 damaged dresser, you should state a 1 in the on the appropriate line under Quantity, column B. Easy, right? However, when it comes to a large amount of similar types of items, some policyholders become lax. For example, all the spices in the kitchen are destroyed. Some homeowners will state in that line- 1 - Cooking Spices - $50.00 = Amount of Loss $50.00. While the insurance company might pay you the $50.00 for your spices, you have not fully complied with the policy. I prefer to state each item separately i.e. pepper, cumin, garlic power, garlic salt, garlic pepper, minced garlic. I recommend you, the policyholder, go to the spice isle in the supermarket; this will help remind the insured what items were destroyed and establish a proper replacement cost value. What you may also discover is that the cost to replace all the spices you had far exceeds $50.00.

Secondly, you should describe the damaged property.Do not just say a shirt, if the brand name of the shirt is Van Heusen. Say something like Van Heusen long sleeve white shirt. Don't just say dresser, if the item was a solid signature wood dresser with 12 drawers. Be as specific as possible, within reason. Don't describe your damaged items as coming from Macy's if you normally shop at Walmart. Be specific and factual. Remember, if you use credit cards, it is not hard to verify where you normally shop.

Thirdly, you need to state the Actual Cash Value.   Most insurance companies define Actual Cash Value as Replacement Cost less depreciation. So what is depreciation? Some companies define this term as the amount of value an item looses over time due to age, normal wear and tear, or obsolescence. For example, you buy a couch for $2000.00 and delivery is $50.00 = $2,050.00. The chart states life expectancy for upholstered furniture is 10 years. After 4 years, it is destroyed in a fire. That same couch may now cost you $2150.00 and delivery charge may now be $100.00. What are you owed? If you were to depreciate by age, this is how it would work. You used up 40% of the expected life of the item, so you have 60% of the value of the item left, or $2,150.00*60%= $1290.00 + $100.00 for a total payout of $1390.00 on this item. Did you notice I said if you were to depreciate it by age? Depreciating by age is the common a common method to determine Actual Cash Value, but it is not always the fairest way. A normal family might need to replace a couch every 10 years, but a middle age single person might never need to replace the couch again in their life time. A high-quality upholstered couch will hold up better and last longer than a low-budget couch from a discount store. A couch in a formal living room will last longer than a couch in a family room in front of a TV. Damaged items can also be depreciated according to their condition. This method is generally fairer but leaves much more room to speculation and conjecture. Many times the condition of the property will vary from person to person.

Fourthly, you should state the Amount of Loss. For the sake of this discussion, I am going to define the Amount of Loss as what it will cost you to replace the item. Some insurance companies will also refer to this amount as Replacement Cost Value. What will it cost to buy the solid signature wood dresser with 15 drawers from Havertys? You might find a cost a retail cost of $1799.00, but what about delivery? Get the prices from where you normally shop. If you bought a shirt from Macys and the shirt is not longer available anywhere, then find the price of a shirt that is comparable from Macys. It may be wise to indicate on the supporting documents that this is a comparable match and not the exact item.

Additionally, you will need to provide documentation that will justify or substantiate the contents loss claimed on your personal property sheet. In other words, how did you come up with the cost for each of the items listed? I recommend you provide any receipts or invoices that you might have for the items you are claiming. You should also confirm if the replacement cost for that particular item has changed since your purchase. Go on-line and see what the retail cost is today and print out that information. If you replaced an item on your personal property worksheet with one of like-kind and quality, you should provide that receipt to the insurer. Justifying the cost you claim may be very time consuming, and you might want to consider hiring an experienced public adjuster to assist you with your claim. Should you wish to retain my services, I would be happy to assist. The first step you should due is to start preparing a personal property worksheet ( printable copy of personal property worksheet )

While the information in this post does not address all of the problems you might encounter, I hope that it will provide you with some information to get you started. I you should have any questions, place send me an email. You can contact by following the Contact Us link on the main menu.

How to Apply Depreciation in Xactimate


Many homeowner's Replacement Cost insurance policies state that Coverage A damages be settled on an actual cash value basis until the repairs or replacement is completed. Insurance companies frequently determine actual cash value by taking the replacement cost value of an item and subtracting the depreciation. Xactimate defines depreciation "as a value deducted from RCV as a result of an item's age, usage, or general condition." when insurance company's adjuster takes the replacement cost and subtracts for the depreciation the result of this calculation is commonly referred to as ACV. Usually the percentage of depreciation he uses is based on the life expectancy of the item being replaced, but how does the homeowner know if the correct % of depreciation is being applied to their loss?

Xactimate is probably the most widely used property estimating software used by insurance carriers. Xactimate allows line-items to be depreciated in one of the following ways:
percentage, amount, or age/use. For years, the most common way of applying depreciation was by percentage. However, depreciating by age is now becoming a little more popular. The insurance adjuster will gather information from the client in regard to the age of the items being replaced and then apply depreciation accordingly. However, is defining by age alone the most relevant factor or the only relevant factor the adjuster should consider? Read more about applying depreciation by Age and Use.

Let us look at an example of depreciating the paint on the walls in a room 20'x15'x8' using the age/use properties. Xactimate has determined the average life expectancy for interior paint is 15 years. If the paint on a wall is 3 years old, it would then be depreciated for 3 years @ 6.67% per year. Xactimate considers 6.67% depreciation per year the average amount that should be applied under average conditions. Should the insurance adjuster adjust this percentage amount if the rate of wear and tear on the wall paint does not fall within the category of average? Under what conditions should the adjuster apply more depreciation, and under what conditions should he apply less depreciation? These are two important questions that every adjuster should consider.

It may have merit to apply a greater percentage of depreciation to the paint on the walls if the home were occupied by family of 13. I may also be correct to apply a smaller amount of depreciation to paint in the home of a single family member. It may also be correct to apply less depreciation to a home only occupied 3 months out of the year. How can the adjuster account for this situation? Good news, Xactimate allows for this type of scenario and provides for the adjuster a venue to either accelerated or decreased depreciation in a drop-down box called "Use." Within this section of Xactimate, the user can stipulate if depreciation should be applied in normal, heavy, or light fashion. He could then choose heavy of more than the average amount of people occupied the home and caused more than average wear and tear to surface of the paint on the walls. Conversely, he could choose light for the little old lady who maintains her home in a pristine condition and seldom hits or mars the walls. By choosing "heavy" or "light" the 6.67% depreciation per year is either increased or decreased in value.

In the example cited above the average amount of depreciation applied to the paint on the walls in a room 20'x15'x8' would be $53.76. If depreciation "use" were changed to heavy, the amount would be $75.26. If depreciation use were changed to light, the amount would be $32.26. So you can see depreciation is lowered about 40% when the "use" is changed to light and is increased about 40% when the "use" is changed to heavy. The further application of these "use" factors seemed to offer a better method to determine ACV when applying depreciation to the value of the loss. The question is why are not more insurance adjusters taking advantage of this feature in Xactimate? Very seldom do I see the "use" feature change to "light." If depreciation is being figured by age, and the adjuster is not modifying the Xactimate "use" feature when appropriate, is the Net Claim amount of the estimate correct?

Though some Homeowners are aware that Ordinance and Law coverage is available in their policy of insurance, most do not know what additional benefits this coverage provides. So why is Ordinance or Law coverage found here with other items commonly referred to as causes of loss? The answer is this: to remind you that additional coverage might be available for your loss. Most homeowner's policies contain Ordinance or Law Coverage, O&L, but many homeowners do not avail themselves of this coverage.

O&L coverage is only triggered when the insured suffers a covered loss to the dwelling.

Ordinance or law coverage is not provided to improve the homeowner's dwelling unless a covered cause of loss takes place first. This coverage is not meant to fix damages caused by the contractor during construction. Unless you first suffer a covered cause of loss, this endorsement will not provide coverage.

The coverage is usually excluded unless endorsed in most policies. Many homeowner's policies contain the following language.
1. We do not insure for loss caused directly or indi¬rectly by any of the following. Such loss is ex¬cluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.
a. Ordinance or Law, meaning enforcement of any ordinance or law regulating the construction, repair, or demolition of a building or other structure, unless specifically provided under this policy.
Florida Statute 627.7011 requires the insurer to offer Ordinance or Law coverage.
This additional coverage is required to be offered in the amount of 25% and 50% of the Dwelling limit. This requirement only applies to all "homeowner policies". Please note the insurance company is only required to offer this coverage. The homeowner may reject this coverage by signing a written refusal.
This coverage is triggered when the insured is required to comply with a law, ordinance, statute, building code, and additional costs are incurred.
You should read the language of your policy or endorsement very carefully. Many policies only provide coverage when the increase cost you incur is due to a building code requirement enforced by your local building inspector. Not only do these code up grades have to be required by the building department, you have to actually incur the cost.

This Coverage should be considered before making any Coverage A - Dwelling settlements. Please call to discuss. On older homes especially, thousands of dollars are available under this coverage once you have reached Coverage A policy limits.

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