All too often, disaster victims find out that they will not receive enough money from their insurance company to replace everything that was destroyed in their fire, tornado, hurricane or other catastrophe. Many have stated that they received only 30%-50% of the total amount they needed. There are two main reasons this happens.Type of CoverageMany homeowners’ policies cover the home on a replacement cost basis, but the contents are covered on a “cash value” basis. Cash value is the true worth of each item after depreciation is taken into account. For example, a sofa that cost $1000 new might be valued at only $500 when it’s a few years old. If most of your household items depreciated by 50%, you can see that you’ll receive a settlement for only half of what it will cost to replace everything.If you do have replacement cost insurance coverage, you still face a high probability of a major financial loss. Unfortunately, many policyholders believe that the insurance company will just cut a check for the amount of their contents insurance. It is not that easy!No Personal Property Inventory The insurance company will pay the amount only of the actual loss. How is that determined? You’ll be required to submit an inventory of each item you wish to have replaced. This is noted in your homeowners insurance policy under the section titled “duties after a loss.”Most insurance policies include this standard language:“Prepare an inventory of damaged personal property showing the quantity, description, actual cash value, and amount of loss. Attach all bills, receipts and related documents that justify the figures in the inventory.”If you do not provide this requested personal property inventory, the company reserves the right to not pay for any of your loss. It is extremely difficult to compile this information without having the items in front of you. Additionally, when under the emotions and stress of the loss, plus pressure to meet the insurance company’s deadlines, your ability to remember is further hampered. Therefore, it is highly recommended that you create your inventory prior to a loss, and store it with supporting documentation in a fire proof safe, away from your home or business or on an encrypted online backup service.If the payment is less than the amount you turned in, your pre-disaster documentation may be the key to receiving more than originally offered.To ensure that you can recover properly from a disaster, create an inventory now, in preparation for a disaster, and be sure to carry replacement cost coverage.