Inventory lists and evacuation plans: What clients need to know

By Lisa Lindsay

The pandemic has caused changes in our lives. Many homeowners moved to new homes in locations they knew little about, while others renovated their existing homes in hopes of finding peace and balance while practicing social distancing. Some occupied their time by becoming new collectors, and others took advantage of the opportunity to dabble in the new sharing economy trends of renting homes, autos and swimming pools. These changes, coupled with rising costs due to supply chain issues and inflation, put homeowners at risk, leaving them unprepared for the road ahead.

The changes also provide a perfect opportunity for agents to step up their client outreach and navigate them through this time of uncertainty. Has your client reported major renovations to their home? If so, will their policy adequately cover them? Do they have a video inventory list of their most valuable assets? Do they have a family meeting location identified if they're separated during an extreme weather event? Answers of "I don't know" signal strong red flags that should prompt you to take immediate action and reach out.

Two main areas of focus

Although there are many factors to consider when counseling clients, let’s focus on two primary areas of concern. First, do they have the right coverage, and second, do they have an overall preparedness plan in place to help ensure the safety and protection of their family and assets? We'll begin with coverage.

Does your client have the right coverage, and is it enough? Insurance agents must work hand-in-hand to educate their clients about the importance of securing adequate coverage. Fully comprehending their needs requires a deep dive into their lives. Start by asking whether they have recently added a pool or an in-law suite or made other upgrades. Begin with dwelling coverage and move on from there.

Dwelling coverage – When was the last time replacement cost value for the home was determined? Does it seem in line with current market trends and conditions? What type of replacement valuation clause does the policy provide? Is it unlimited, or is there a cap on the amount paid regardless of the actual cost to replace or rebuild? Does the policy allow for a cash settlement if the homeowners do not want to rebuild, or will they be required to rebuild the home at the exact location?

Significant increases in the cost of construction mean that homeowners must understand how the replacement cost of their home was derived and how their coverage will respond after a covered loss. According to Chubb's 2022 Cost Factors Review, two drivers contribute to the rise in construction costs: the shortage of skilled labor and supply chain challenges.

Other structures coverage –This coverage is usually a percentage of the dwelling value. The pandemic led to an unprecedented increase in the construction of outdoor living spaces, such as pools, hardscapes, detached garages and sheds, gazebos and outdoor kitchens. Demand impacted supply, causing the price of materials to skyrocket and inadvertently leaving homeowners underinsured. Other structures' coverage can often be overlooked, so take the time to understand what upgrades your client has made and whether more coverage is needed.

Personal property coverage – This coverage compensates for personal property, such as furniture, clothing, yard maintenance equipment, TVs, computers and other electronics. The replacement cost for many of these items is increasing as well. It is essential to inform your client that not all personal property is the same. Valuable articles coverage will provide more favorable covered loss provisions and often provides agreed value coverage, so there is no mystery on the payment amount for a covered loss. Some valuables, such as artwork, jewelry, antiques and memorabilia, may require scheduled valuables article coverage. Certain carriers will provide specialized risk management services to help homeowners understand how to pack, ship and store these valuables.

The most efficient way for your client to understand the type of property they own is to encourage them to create a home inventory list. An easy way for them to start is to hit the record button on their smartphone and take a room-by-room, closet-by-closet video of everything they own. A video will provide them with documentation and memory recall at the time of loss, but it begins the thought process of understanding all the different things they own and take for granted. They could also use one of many home inventory apps available as well as specialized apps for fine art collections.

Loss of use coverage – This coverage varies and can be a percentage of the dwelling value and can even provide unlimited coverage. Should a homeowner be unable to live in their home due to a covered loss, this section of the policy provides coverage for the additional living expenses incurred. Given supply chain issues and labor shortages, we see increased amounts of time when someone is displaced while their home is being repaired or rebuilt.

Liability coverage – Often, there's not enough time spent on understanding whether a client has proper liability coverage to protect all the risks associated with their lifestyle and if all the activities they engage in would be covered under their homeowners or personal umbrella policy. The pandemic and changes in client behaviors and interests have highlighted this potential coverage gap. Thorough risk analysis on a client-by-client basis will identify risks and quantify the appropriate level of coverage.

Examples of increased risk exposure include the addition of a pool, pets and an explosion in the sharing economy. We've become familiar with Airbnb and VRBO, but the sharing economy has risen to a new level with pool rentals on swimply.com, cars on Turo.com, spaces for a private dog park on sniffspot.com or vacant land for campers on hipcamp.com. Whether someone has engaged in new activities for their own personal pleasure, just to be neighborly or gain extra income, there is no denying that these activities can increase risk exposure.

Personal risk management extends beyond ensuring your client is adequately covered. A personal preparedness plan is essential and means looking beyond the obvious to help clients assess risks that would likely occur based on their family and lifestyle. The first step is to identify emergencies that are most likely to happen.

Is your client truly prepared for an emergency?

The reality is most families do not prepare fully for emergencies. A thorough personal preparedness plan is a good idea for all families and a must-have for high-net-worth individuals with complex lifestyles.

After creating a list of possible emergencies, it's time to make an action plan that helps clients prepare for risks likely to occur based on their lifestyle. A comprehensive plan should do at least the following:

Identify emergencies most likely to happen, such as earthquakes, wildfires, hurricanes, tornadoes, floods, travel-kidnapping and ransom, among other things.
Address who in the family will take what action and when it needs to be done. Examples include when the storm shutters need to go up, what valuables need to be moved, and what medication is needed if an evacuation is needed.
A detailed communication plan that includes where family members should meet if they're separated, as well as emergency contacts to report safe check-ins.

The plan should also cover personal safety at home and when traveling, as well as the protection of property, such as coordinating the removal of valuables, and cybersafety rules that protect your client's privacy.

A personal risk management strategy starts with a frame of mind and requires effort. It must be detailed and cover all potential risks that can be monitored, updated and tested regularly. Most people don't plan for emergencies, and the consequences can be costly and devastating. It's vital for any broker to understand risks and help clients plan for those risks.

Lisa Lindsay is executive director with the Private Risk Management Association. She may be contacted at [email protected].