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The insurance industry loses billions of dollars to insurance fraud annually. Many think it is a victimless crime, assuming that insurance companies have deep pockets.
Unfortunately, these losses result in higher premiums for all. In fact, this crime costs the average household across the United States between $400 and $700 annually in increased insurance premiums.
Fraud consists of claims being inflated, staged, or in some cases, total fabrications. Property insurance fraud occurs when individuals destroy their own property or make a false report of theft involving personal property. The purpose is to obtain payouts from their insurance companies.
Another fraudulent act is to inflate personal property claims so the policyholder can replace lesser quality contents with "better" items than were actually owned. The most serious property insurance fraud schemes involve arson because there is a greater risk of injury or death, and insurance covers not only the burned structure but also all of the home's contents.
With the fraud that is happening on a regular basis, it is evident why insurance companies require proof of ownership before they pay on a claim. A home inventory completed prior to the time when you need to file a claim will help you move through the claim process faster than those who do not have this documentation already prepared. This is because you have the proof the insurance adjuster and the insurance company is seeking:
Photos to prove ownership. We are aware of many circumstances when homeowners could not prove they owned specific items. Without proof, the insurance company would not provide the funds necessary to replace them. For example, a baby grand piano is not a normal household item. After a fire completely destroyed a home, the adjuster required proof they owned the piano as listed on their claim. Since they couldn't provide proof of ownership, they received $0 to replace this expensive item.
Information to prove value. A picture will show that you actually owned an item. The manufacturer and model number will help prove value. The name brand will help establish the cost of the purchased items. The model number also is helpful to prove if it was a top-of-the-line item or a basic model. A top of the line power tool can cost three times what a basic model costs. Having the model number documented can establish your initial investment and thus receive the funds you need to replace it with a like item.
Stress and time savings. A remarkably less amount of time will be devoted to the prep work when completing the claim form. The adjuster will most likely have fewer questions, and when he or she does ask, you will have the information in your inventory report. Considerably less time and stress will be spent trying to remember what you owned - and then trying to prove it.
This also shows the importance of keeping your inventory up to date. Insurance companies prefer that an inventory be no more than two years old. We recommend an annual update, or better still, as each new item is purchased.