Prepare for Natural Disasters by Planning Ahead

Summary

  • Natural disasters have become so commonplace throughout the U.S., it’s safe to assume that one will strike in your area eventually.
  • While no one can predict when a natural disaster will occur, you can take steps now to be financially prepared to ease the burden of recovery.

 

 

“That’s never happened here before.”

“I didn’t think it would happen to me.”

These are often the sentiments expressed by people who are suddenly affected by a natural disaster. Weather disasters—like wildfires and earthquakes in the West, floods and tornadoes in the Midwest, pounding rain, paralyzing snow and bitter cold from winter storms in the Northeast, and hurricanes in the South—can all be financially devastating.

In 2018, the economic cost of natural disasters in the United States totaled $91 billion, according to the National Centers for Environmental Information.1 As we reflect on the weather disasters that have already occurred in 2019, the importance of being financially prepared becomes even more commonplace and critical. While you can’t predict when a natural disaster is going to strike, you should assume that one will strike in your area eventually. So, what should you do to be ready?

 

Keep Your Financial Records Safe

Keep key financial records (bank statements and other financial accounts, estate plans, taxes, property, insurance and personal documents) in a waterproof and fireproof safe. A file drawer is not going to protect these records during a flood or fire.

Electronic records should be copied onto an external hard drive or a thumb drive that is stored in the safe as well. You can also keep backups in a remote cloud storage. Here are some ways you can keep your digital data and accounts safe.

Open and Maintain an Emergency Fund

When you’re dealing with an unexpected emergency, it can be a lifesaver to have liquid assets available in an easy-to-access account, like a savings or money market account. It’s likely that you will need to cover short-term expenses for things like an extended hotel stay or living expenses if you are evacuated from your home. We recommend that all families have an emergency fund that covers 2-6 months of living expenses. (This amount should be higher for single-income families). Take a look at our My Spending Plan report to learn more.

Keep some cash in your safe since it may be difficult to access in the short-term while power is out or ATMs aren’t accessible, especially in a variety of bill denominations to cover smaller expenses as well as larger ones.

Conduct a Review of Your Insurance Policies

While reviewing your insurance policies may not sound like the most fun, you don’t want to find out what your insurance policies cover after a natural disaster. For example, if a hurricane created water damage from a flood, it may not be covered by standard homeowner’s policy. A specific flood policy may be required to cover the water damage. Did you know that if you live in California, most homeowner insurance policies do not cover damages from an earthquake?

Review all terms of the policy for specifics. Is the replacement cost of your home covered or just a specified dollar amount? Are your vehicles and other personal property covered? Do you need specialized coverage (for example, wind or mudslide damage)? Listen to our podcast episode titled Insurance Policies and What You Need to Know to learn more.  Your advisor can help you conduct a review of your insurance policies and determine any potential gaps in coverage.

Knowing you are financially prepared for a natural disaster can help ease the burden of recovering from one when it does happen. Talk to your advisor about how we can help you organize your financial records and prepare for emergencies so that you feel confident in handling any potential natural disasters.

 

 

Footnotes

1 2018’s Billion Dollar Disasters in Context,” climate.gov, National Oceanic and Atmospheric Administration, 2/7/19.

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