NEW YORK (CNN/Money) -
By now everyone knows what a home is – it's a place to hold all your stuff. And the wealthier you are, the more stuff you own.
Once in a while (preferably around New Year's, when you've just accumulated a lot more new stuff), it's a good idea to go through the house and take inventory to figure out just how much you have.
There are good, practical reasons for that. In the first place, determining your net worth, which you should do once a year (see "How much are you worth"), gives you a good overall picture of the state of your overall financial health. And included in that net worth calculation can be valuables such as jewelry, antiques, electronics, and other stuff that can be turned into cash.
But more important, an inventory can also serve as a vital tool for insurance purposes.
"An up-to-date home inventory is one of the best ways to make the most of your insurance dollars," says Jeanne Salvatore, spokeswoman for the Insurance Information Institute (I.I.I.), an insurance industry trade group.
Account for everything
A proper inventory will not only list the things you own, it will have an estimate of each possession's dollar value. It can you help to:
- Purchase enough insurance to replace the things you own. You and your agent can tailor your coverage better if you know what you may need to be replaced.
- Get insurance claims settled faster. Having an inventory smooths the whole process. You're also much less likely to forget any items when you file your claim.
- Substantiate losses for income tax purposes. It will provide documentation to back up a claim of loss to the IRS.
To make taking inventory easier, the I.I.I. launched a Web site this December called Know Your Stuff. There, you can download free inventory software, tips on how to document your holdings, and lists of things people typically own.
Salvatore points out that when making a record of possessions, you should not only note expensive items, but also more commonplace things such as toys, CDs, clothing, and even towels and linens, because the cost of replacing these items can really add up if you suffer a disaster.
The software makes it easy to periodically update the inventory; a new necklace or plasma television can be added with one mouse click. Salvatore recommends you add to your inventory whenever you make a significant new purchase, and also make it a practice to look at it once a year to make sure it's up to date.
An inventory saved . . .
Once you build up your inventory, it's up to you to save it. Citing privacy concerns, the I.I.I. does not store the data for you.
Since the information resides in your computer, which can be stolen, or destroyed, you might want to print out a hard copy or put it on a disk for storage in a safe deposit box or other secure location. Or e-mail it to a trusted friend or relative to keep – even to your work computer.
The important thing is to have easy access to the inventory in case of loss; after all, you'll want to get that settlement check quickly so you can go out and buy more stuff.