Do you have enough insurance and could you collect?
Why You Need a Home Inventory
by Rick Kahler
How to Save Money on Your Home Insurance
Changing Insurance Needs
Insuring Your Possessions
In my experience, the number-one reason people engage a financial planner is to sleep better at night. That doesn't mean planners give advice on what kind of mattress to buy. The sleep aids we provide are more about peace of mind.
For example, you may be sleeping just fine, thank you, because your home and contents are covered by homeowners insurance. A planner might disturb your sleep by helping you look at whether you're getting the most protection from that insurance.
The first is having a detailed listing of all your home's contents, along with proofs of purchase and serial numbers. If a fire or flood destroys some possessions, the insurance company will need a detailed list of everything that was lost.
You have that list, right? It's safely stored in a secure location other than your home, correct? And you update it annually? Congratulations, you are one of the .01% of homeowners that do!
Now, let's be serious. There is a high probability you don't do this and you are not losing sleep over it. Last time you checked, the amount of insurance to cover your home's contents seemed so high you could replace everything in your house and have enough left over to furnish your neighbor's place.
While you may be right about that, you could be terribly wrong. Do you know for sure?
Maybe, if you don't have expensive artwork or jewelry, you assume your ordinary belongings wouldn't be that expensive to replace. This isn't necessarily the case. If your refrigerator or washer and dryer are old enough to vote, you might be shocked at what it would cost to buy new ones today. Or think about what you might spend if you had to replace all the tools in your garage at once. How can you know the true cost of replacing all the contents in your home and that your insurance is high enough to replace them? You can by having an inventory of them and a reasonable idea of their current replacement cost.
If that isn't enough to disturb your sleep, consider this. A fire doesn't burn your house to the ground, but the contents in just a portion of it are destroyed. Now you really need that list. How are you going to prove that your $5,000 upscale mattress wasn't a generic $800 version or that your silverware was actually made from silver and not steel? Just having enough coverage won't help you in this situation. This may leave you thinking maybe you should have a better plan than praying, "If there is a disaster to my home, please let it be a complete one."
The good news is there is an easy way to document everything in your home without having to make a detailed list with attached receipts and serial numbers. Simply get out your smartphone, walk through your house, and make a video recording of everything in it. In addition to filming furniture, fixtures, and wall hangings, you should be sure to open drawers, closets, and boxes. Capture the serial numbers of big ticket items and be sure to include the garage, all collections, china, silverware, and expensive antiques. Then store copies of the video in several places, including on the cloud and at least one flash drive located outside your home. Update your video once a year.
If updating the contents portion of your insurance and making a video inventory don't help you sleep better, maybe the problem really is your mattress. My advice is to do some research through Consumer Reports before you buy a new one and be sure you add it to your home-contents video.
Take the Next Step:
- If you don't have an inventory, do one room at a time until you have a complete set.
- Get control of your financial life. Subscribe to Financial Independence, a free daily email that provides you with the tools to help you gain that control and achieve financial independence. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist for FREE!
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