Financial Strategies for Natural Disasters

Thousands of families are still recovering from the series of tornados that ripped through the southeast as well as other parts of the country. The financial and emotional devastation has been cataclysmic. As bad as this has been we all know that natural disasters are a part of life and will recur ad infinitum in the future. The only question is, “Who will be the next victims?” Unless you somehow know you’ll always be spared, it makes sense to take basic precautions to defend yourself, financially speaking. Here are 5 basic strategies that will help you survive the financial fallout should you become a victim of a natural disaster:
  • Emergency reserves. The recent tornadoes left hundreds of families homeless while they waited on overloaded insurance companies to respond to their financial needs. Make certain that you maintain three to six months of living expenses in an easy access money market account to cover unexpected expenses.
  • Adequate insurance coverage. Many homeowners found out too late that their insurance coverage was less than adequate. On at least a biannual basis you should have your insurance agent review your coverage to make certain it is appropriate. Consider ‘replacement value’ coverage versus ‘cash value’ coverage. The former provides funds to fully rebuild your home whereas the latter reimburses based on the insurance adjusters estimate of the value of your home. If you live in earthquake or flood prone areas, you’ll want to consider special coverage for these disasters.
  • Video your stuff. In hundreds of cases, nothing remained where a home once stood. How would you ever recall all of the items in your home? Note that the insurance company depends on you to list what was lost or destroyed before they can reimburse you. Use a video camera to video all of your belongings. This will take you less than two hours and could mean thousands of dollars of reimbursement should disaster strike.
  • Document storage. Consider using new technology such as ‘cloud storage’ to keep a back-up record of your most important documents such as your wills, insurance policies, medical and dental cards, passports, credit cards, birth certificates, marriage license, medical prescriptions, deeds, driver’s license, family photos, as well as back-ups of your financial records. Cloud storage is a way to copy and store ‘paperlessly’ your documents. Visit Apple’s www.iCloud.comfor more information. In the aftermath of Katrina, one of our clients lost everything to the flood. Fortunately, we had electronic back-ups of all of her important documents and were able to assist her insurance agent with the claims reporting he needed to get her immediate assistance.
  • Keep some cash on hand. In the case of a wide-spread disaster, access to banks and bank ATMs might not be possible so consider keeping enough cash on hand to get you through a couple of days.
While it’s impossible to fully prepare yourself against a natural disaster, by taking these simple steps, you’ll be in the best position to weather the storm. By the way, each of these steps is a smart financial strategy if you never become victim of a natural disaster!

 

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