An Inventory of Everything You Own

California’s recent spate of fires should serve as a wake-up call to homeowners and renters. If you have valuable property--regardless of whether it’s insured--you need a home inventory.

A home inventory is nothing more fancy than a detailed list of all the items in your home and roughly what you paid for them. If possible, you should also have receipts--filed with your home inventory--for big-ticket items such as appliances and furniture. And, of course, this inventory should be stored somewhere other than your house or apartment.

Why do you need an inventory? If you have insurance, it gives you the documentation to help ensure that you get reimbursed for all property you’ve lost--including the vast array of small items you’d probably otherwise forget to claim but that add up fast when you need to replace them.

Fire victims say it is virtually impossible to remember just how many blouses you had in the closet, much less how many utensils were in each drawer after a fire has consumed them. Yet the average homeowner or renter has literally hundreds of small possessions, ranging from $5 soup ladles to $2 toys. Being able to catalog what you’ve lost can allow you to claim the maximum amount.

In the past, some argued that if the contents coverage on your policy was relatively modest, you didn’t need an inventory because the insurer would be likely to pay the maximum amount the policy called for without a lot of documentation.

Now, however, industry experts maintain that many insurers have tightened their claims-paying policies after several major disasters and may be reluctant to pay up-to-the-limits claims that aren’t supported by good records. In particular, anyone with a guaranteed-replacement-cost policy should have records to establish the quality and quantity of what was lost to be adequately reimbursed.

For those who don’t have insurance, an inventory will allow you to establish the size of your loss for tax purposes. Federal tax laws allow you to deduct casualty losses that exceed 10% plus $100 of your income plus $100. Casualty loss rules are complicated, so it makes sense to hire a professional tax advisor if you plan to claim such a loss.

However, no matter whether your loss will be covered by insurance or claimed as a deductible on your tax return, you will be responsible for establishing what you lost and what it was worth.

The easiest way to do a home inventory is with a video camera. (You can do a written inventory, but to provide the same amount of valuable detail that you can get in a moment with a camera would require days of writing.) If you don’t have a video camera, consider borrowing or renting one.

Condominium owners and renters may be able to do this more quickly--and perhaps with a still-frame camera--because their insurance policies usually won’t cover the building’s structure, building details or grounds.

For an average homeowner, completing a good home inventory will require one videotape and roughly one or two hours of time.

How do you do it?

A homeowner should start at the street, far enough from the house to scan not only the entire structure, but also to take in any detached structures and a general look at the flora and fauna. You should also scan the street, briefly, to get an overview of the neighborhood.

Why? Casualty losses can be established in one of two ways: Either by the cost of completing repairs or by determining the permanent drop in the fair market value of your property, says Gregg Ritchie, partner in the personal financial planning group at KPMG Peat Marwick in Los Angeles.

The fair market value of your property could conceivably be severely damaged--even if your house was only modestly affected--if the rest of your neighborhood goes up in smoke, he says. That’s simply because home buyers will pay more for neighborhood ambience--rows of pretty homes surrounded by mature trees and shrubbery. To the extent that a fire permanently destroys that valuable ambience, you have a deductible casualty loss, he says.

Now turn on the video camera and start talking. Open with your name, the date and the fact that this is an inventory of your home at a specific address.

While you are chatting, slowly pan across the front of your house, making sure to take in all structures as well as a general impression of the neighborhood. Then walk up your driveway or walkway and all around your house, scanning and mentioning any noteworthy features such as new windows, special tile or any special things involving the home’s construction.

This is also the time to film outside structures, including pools, cabanas, gazebos, fences and sheds. Once you’ve done a thorough job outside, move inside.

But before you do, figure out a methodical approach that will allow you to scan each room and each item in it--including all the debris shoved into closets and drawers.

One way to do this is to start taping at the same corner in each room.

For instance, you may arbitrarily decide to start with the northeast corner. You then stand in the middle of the room and turn clockwise from that corner, making sure to get a view of everything from the molding to the floor. By the time you’ve completed one circle, you should have taped the outside of all the sofas, chairs, desks and chests in the room. Then, do a second, more detailed, revolution in which you open drawers, cabinets and closets to get a close look at what’s inside.

Repeat the process in every room and also in your garage, shed or anywhere else you might be storing valuable goods such as lawn mowers, tools, overflow furniture and other household items.

Whenever possible, be sure to mention what you paid for the items you are filming and how long you have owned them.

When you’re done, watch the video on fast forward just to make sure that the lighting was sufficient and that you didn’t leave out anything of import. Then pop it in an envelope with copies of any receipts you may have kept for expensive items--beds, sofas, armoires and desks, for example. Put in a copy of your current homeowner’s insurance policy too. You don’t want to use original receipts or your original homeowner’s policy because this is an envelope that you hope never to need. It will be pulled out only in the event that you have a catastrophic loss. In the meantime, you may need the original receipts for something mundane such as to return a product or to claim a more minor loss.)

Your final step is to call a trusted friend or relative--preferably not a neighbor whose home would be likely to be consumed in the same natural disaster as yours--and ask that person to hold on to your inventory. If there’s no one you would trust with this information--or no one you would feel comfortable asking--take the package down to a local bank or thrift and rent a safe deposit box.

A final note: Most homeowners policies restrict coverage of certain pricey items. If you have valuable office equipment, expensive jewelry, furs, antiques or collectibles, you may need special coverage “riders” for these items to be fully insured. If you are uncertain about what’s covered and can’t determine the answers by reading your policy, call your agent and ask. It’s better to ask when there is no disaster than to get more bad news in the wake of catastrophe.

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That’s Standard

A standard homeowners policy has a host of coverages--and limitations. You can buy extra coverage for special situations.

What’s standard?

* Structure. A standard policy pays to rebuild your home precisely as it was, subject to certain limits. If you live in an old home, beware. Structure coverage usually does not pay for “law and ordinance” upgrades, but insurers sell “law and ordinance” riders.

* Contents. A typical policy will pay 50% of your structure limit for the contents in your home. Usually this coverage pays only enough to replace precisely what you have. So if you lose a 10-year-old couch, you’ll get a check to buy an aging couch of similar quality. For a new couch, you’d need guaranteed replacement cost coverage.

* Separate structures. Detached garages, gazebos, sheds and fences would be covered up to separate limits, often 5% or 10% of the structure limits on the house.

* Cash/other items: Most policies limit recovery of cash, precious metals and coins stored at home to $100 or $250, unless higher-limit coverage has been purchased. Tickets, stamp collections, manuscripts, deeds and financial documents are usually covered to $1,000. Art, rugs, firearms, jewelry, furs and silverware are typically covered to a maximum of $2,500. Computers are usually covered to a maximum of $2,500 or $5,000.

* Not covered. Standard policies generally don’t cover losses to business property kept at home, to aircraft or boats, or pets.