By Martin A. Smith, CRPC®, AIFA®, President, Retirement Planning Financial Advisor™, Wealthcare Financial Group,...
Are You Financially Ready if Disaster Strikes?
You may have prepared yourself for a disaster by storing water, flashlights, and your emergency supplies bag, but are you ready financially if a natural disaster strikes? If a disaster impacts you, especially if there is a need to evacuate, you may need to file an insurance claim or apply for a personal loan to supplement displacement expenses. Organizing your important financial papers ahead of time can be very beneficial and ease stress.
Below are a few things to consider that may tell you whether you are financially ready for a disaster.
Know What Your Home or Renter’s Insurance Covers
Take time to have a discussion with your insurance agency to go over the fine print of your policy and discuss different real-life scenarios. Don’t wait until it’s time to make a claim to know what your insurance covers. It is better if you do it now. For example, see if your insurance details out the following:
- Will any evacuation expenses be covered?
- Will you be getting a replacement cost for the possessions that were damaged or the depreciated value?
- Does your policy have hurricane deduction, meaning that you will be responsible for a specified percentage of your home’s value before the insurance covers damages?
Keep a Photographic Inventory of Your Possessions
In the aftermath of a disaster, it will be difficult for you to accurately recall all of the contents of your house. Having an inventory of your belongings will help you go through insurance claims much more smoothly, and you will end up with a better settlement.
Practice the Backup 3-2-1 Rule
For your most important financial and legal documents and records, make three copies of each in two different formats and keep one copy off-site. With certain disasters affecting the whole region, you may want to keep a backup copy some distance away, perhaps send it to a trusted relative living in a different state.
Protect the Original Documents
Keeping the original document in a deposit box can work wonders, or if you are more comfortable with keeping the documents at home, make sure you keep them in a safe that is waterproof and fireproof.
After you have made copies of the original documents, keep the originals in the deposit box or safe. These documents may include:
- Custody or divorce papers
- Birth, death or marriage certificates
- Adoption papers
- Social security cards
- Mortgage or property deeds, or other ownership records
- Bond certificates
- Trust agreements
- Power of attorney
Your Financial To-Go Bag
Place a bag with the copies of all the documents you have in your safe deposit in a convenient place so you can grab it as you leave in an emergency. These papers can include the following:
For insurance claims or tax losses:
- Household inventory
- Warranties and receipts of large purchases
- Copy of appraisals
- Home improvement records
- Critical insurance information such as policy numbers and claims contact information
For loan applications:
- Federal and state tax returns (three most recent)
- Residency proof
- Pay stubs (recent)
- Key to the safety deposit box
- Extra set of keys
- Copy of prescriptions and insurance cards
Keep Enough Cash in Your Financial To-Go Bag
After a disaster, ATMs may not work, or financial institutions could be closed. Therefore, it is best if you keep extra cash in your bag for at least three days of expenses for the family.
Keep a Letter of Intent
In case you are not there to help your family through a disaster, you should keep a letter of intent in your financial to-go bag. It can help your family by giving them instructions and information in case someone is seriously injured or worse. Include in it the location of the documents, names and contact numbers that can help them in time of a disaster.
Taking time to prepare yourself for a disaster can help save you a lot of money and headaches. It will also help you in reducing your anxiety in an inevitably stressful time. Being prepared now is better than scrambling at the last minute or waiting until it’s too late.