Insurance Information Institute

Having adequate insurance coverage is an important part of financial freedom. Especially if you do any kind of physical labor for a living, long-term disability insurance is an absolute must.

I'm also a big believer in renter's insurance: I learned that one the hard way over the years. I was always too broke to afford it, but when my stuff got stolen, it caused a lot more damage to my finances than renter's insurance would have. (And wouldn't you know it, I always managed to scrape together enough money to replace my stolen stuff. I could have figured out how to pay for renter's insurance if I weren't being an idiot.)

However, there is a flip side to insurance coverage. Your homeowner's policy almost certainly makes you get too much coverage. We tell clients to review their coverage and adjust it accordingly; I'm sure no one ever follows up on that. But the Insurance Information Institute has a tool that can help.

They host Know Your Stuff, a free home inventory program that you can download and use to catalog all of your belongings. This can really come in handy if you have an insurance claim. It also showed me that I'm paying for twice as much coverage as I need on my belongings. I'm sure when I talk to my insurance company and get that adjusted it won't change my insurance payments by much, but it'll be worth doing even if it's a tiny amount.

The III also has page on credit with some good information. Your credit really matters when it comes to your insurance. You may have gotten a letter from your insurer saying you weren't getting the best rate because of your credit history. I got one of those recently, and my credit score is reasonably high.

The bottom line is, you're probably paying too much for insurance, either because of something on your credit report or you're paying for too much coverage. Completing a home inventory is one way to make sure your insurance coverage is appropriate. It's not a trivial project (I've been working on a home inventory in my spare time for weeks now) but it's one worth doing.