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Property Insurance Checklist

Property insurance generally covers physical damage to covered property, subject to the conditions and exclusions of the policy.
This checklist outlines some of the steps that are commonly required for presenting a claim under a property insurance policy, and some of the documentation that may be necessary. Policies differ in their provisions, and care should be taken to identify the particular requirements, restrictions and exclusions of your policy.

1. Gather insurance policies and related insurance records. If policy was destroyed or is lost, contact your insurance company or insurance agent/broker to request a copy.
2. Contact others business partners, such as attorneys and accountants, who may have copies of your insurance policies and records.
3. Give notice to your insurance agent and company(ies) immediately, preferably in writing.
   Notice should provide the following basic information :
   • Name and address of insured
   • Location of loss
   • Date and time of loss
   • Contact name, phone, and fax number
   • Brief description of the loss
4. Prepare a Proof of Loss
   A proof of loss provides details identifying the property destroyed or damaged, and documents the amount of loss incurred. Generally, any information substantiating the claim (photographs, receipts, records) can become part of your proof of claim. Check with your insurance company for the specific information required. Some companies may have a detailed list of documents they seek, or require you to fill out a particular form, such as a Proof of Loss.
5. Acquire copies of police or fire reports (if available)
6. Secure vital records and ledgers.
7. Collect photos or videos as proof of damage
8. Submit proof of loss, photos, and reports to insurance company
9. Assist in insurance company‚s investigation
   Property insurance policies typically allow an insurance company to conduct an investigation of the claim with the insured‚s cooperation. This may be in a provision entitled “Duties in the Event of Loss.” This provision may allow the insurance company to interview the policyholder claimants in a process often called an “examination under oath” (EUO). The policy may also require the insured to exhibit the property, take reasonable steps to protect the property, and generally cooperate with the insurer‚s claim investiga

Protecting Personal Property Immediate Requirements

Working with the salvor: Remember, the salvor is an independent contractor taking over the goods for you and the insurance company. Therefore, should you decide to release goods to them, obtain a signed inventory stating the quantity and type of goods being removed. The value can be established later, although salvors will want this information as soon as possible so they can price the goods accordingly. In the event the amount of the loss does not reach the amount of your property damage deductible, or if the loss exceeds the policy's limit of liability, the salvor, in effect, will be working for you. If either is a possibility, make sure that any salvage agreement contains a provision that nothing can be sold without your approval. In that way, you will have a say as to whether the price being paid is satisfactory.

Unidentifiable pro perty: Occasionally property may be damaged to such an extent that there is little left, or it is so burned, wet or scattered that it cannot be accurately counted or weighed. In that case, you will have to work from existing records, perpetual inventories or updates to the last physical count. Adjustments will be needed for shrinkage or breakage, based on your established tandards. Usually, these will be similar to the adjustments that were made at the last physical inventory.

Safeguard the building: Besides physically securing the property, this is a good time to begin keeping track of all your damage-related costs.

Temporary repairs: The basic concept of obtaining competitive bids for major work applies to repairs following a loss. However, if the loss has resulted from a widespread storm, contractors and materials will be in short supply. Therefore, obtaining bidders for emergency work may not be practical. If you have someone who has done satisfactory work for you before, it will generally be acceptable to use them for the initial repairs, but delay major contracts until the adjuster has an opportunity to review your plan.

Restoring operations: Depending on the magnitude of damage, it may be initially difficult to determine how long operations will be curtailed. In the case of a partial loss, consideration should be given to resuming operations by having work in the affected areas performed on the outside by a specialty shop, competitor, sister plant, or by you at a temporary location. For more serious losses, protecting valuable equipment, supplies and finished goods may be all that can be done for the moment.

Off-premises problems: It is important to do everything possible to quickly reestablish supplies of electric power, water and fuel to the plant. This means either working with the local utility or using temporary sources, such as portable generators. This is especially important because the insurance company's business interruption liability period does not begin until you would have been able to operate, had your property not been damaged. While some policies contain an endorsement eliminating this exclusion, reducing the loss always makes sense.

Preserving Real Property Business Resumption

Assembling the Claim: We have dealt with procedures for establishing the quantity of goods damaged in a loss. The next step is to attach a value to them. Almost all policies contain provisions, which establish the value of various types of property. Following are some of the most common. Finished goods, under many policies, are claimed at selling price, less costs not incurred such as shipping, packing, sales commissions, and returns and allowances. In effect, you are selling the goods to the insurance company, as they sat when damaged, at a price consistent with that size sale. The other coverage option is to value finished goods at their replacement cost. This would include raw material, labor and manufacturing overhead. If some of your merchandise is no longer needed, the question of obsolescence may be raised by the adjuster. This may require that a depreciation factor be applied. The exact amount will be subject to negotiation. Raw material is priced at the cost to repurchase it and return it to the condition it was in when damaged. The best record of that will be invoices you actually obtain when reordering. Remember, it is replacement cost that governs, not original cost. If it isn't being repurchased exactly as it was, or immediately, you can use quotes from suppliers, catalogue prices or recent invoices. Work in process (WIP) is valued at the cost of labor and materials needed to bring it back to the state it was in when damaged, plus a related proportion of plant overhead. If you have a standard cost system, it should provide a good base to work from, depending on how up-to-date it is. Any general and administrative expense associated with WIP is paid for as a business interruption loss, if there is one.

Making Modifications: It is infrequent that, after a severe loss, a facility is rebuilt exactly as it existed. As long as major rebuilding has to be done, there is no better time to perform modifications. However, the insurance company will pay no more than it would have cost to restore your property to its reexisting condition using modern techniques and materials. This means they have the right to replace an old wood mill-type roof with steel deck having similar load, insulating and wear factors. If replacement cost coverage has been purchased, they will pay the full cost without regard to depreciation, as long as the facility is actually replaced. If coverage is written on an actual cash value basis, a physical depreciation factor is applied. This is not the same as book value.

Real Property Personal Property: Physical depreciation takes into consideration the useful life of the property under the operating conditions and maintenance program that existed. This generally results in less depreciation than book value. Depending on the scope and nature of the modifications, establishing the estimated cost to have replaced the building "as was" may be complex. It is well to advise the insurance company at an early date as to what is intended so they can engage a consultant to work with you to establish their liability. Conversely, you will want to have your contractor or architect prepare detailed plans and cost estimates to put the building back as it was. Remember, as with all parts of the claim, the more detail, the easier it will be to prove your case.

Actual Repairs: Because of the nature or extent of the damage, it may not be practical to develop a detailed scope of repairs for bidding purposes. In that case, you and the insurer may agree that a time and material contract may be the best bet. Before commencing, however, the adjuster may want to arrange for a "clerk of the works" to be on hand to oversee the record keeping. Also, prior to finalizing the contract, the adjuster may want to review the overhead and profit percentages charged by the contractor and the hourly rates they pay.
As you move to the task of calculating the business interruption loss, it is well not to worry what a B.I. claim should look like; there is no special format. Concentrate instead on assembling the information needed to complete the formula B.I.=T x Q x V.

Time: If modifications during repairs do not delay resumption of operations, the time will be equal to the period during which operations are suspended. The policy defines the end of the indemnity period as the time when normal operations could have been resumed. However, if restoration is delayed for alterations, a credit to the insurer is required. The critical issue will be how much time has been added due to changes. With perseverance this can be worked out between your construction expert and the adjuster's consultant.

Quantity: On smaller losses it may be easy to establish what the average daily sales or production quantity would have been and to multiply it by the downtime in days to obtain the total loss. However, on larger losses, arriving at an average hourly or daily sales / production value becomes a more complex process. What should be done in those ases is to combine the Time and Quantity functions into a single step, in which the total loss during the claim period is calculated. This is accomplished by first constructing a mathematical model of what operations would have been.