June 13, 2018
Unbiased Financial Information Provided by Financial Finesse
Hurricanes threaten the Southeast every year, wildfires are a danger in Southern California and other dry wooded areas, and tornadoes can be a deadly force in parts of the Midwest. So what can you do to prepare for a major natural disaster like a hurricane or a tornado? And what about preparing for those other unforeseen emergencies like losing a job or going through a divorce?
Experts agree that there are some things that you can do to prepare yourself and your property for when disaster strikes.
Protect Your Property
Some of the most effective things you can do to prevent natural disasters from damaging your property are also the most basic. Don't neglect things like the following:
- Put smoke detectors in the right places and replace the batteries once a year.
- Clear underbrush away from the area around your house, especially if wildfires are a problem near you.
- Install and maintain a sump pump system if your neighborhood is prone to flooding.
- Call the local utility company to come to your residence and show you how and where to shut off gas lines.
In short, be aware of what kind of natural disasters are most likely to threaten your property and prepare accordingly.
Make a List of Your Valuables
Make a detailed list of your most valuable possessions - a "home inventory." You'll be more likely to receive a fast, fair payment from your insurance company if a loss occurs. If insurance does not cover the loss, this list can provide documentation for tax deductions if you are able to claim the loss on your income taxes.
You can create this list by photographing your possessions or simply describing them in writing. Get professional appraisals of jewelry, collectibles, artwork or other items that are difficult to value. Important: Once you have completed your list, leave a copy with relatives or friends, or in a safe deposit box, so that it's not destroyed along with your valuables.
Careful preparation won't help you avoid all the disasters that can cause significant damage to your property. That's why the right insurance is so important.
- If You Own a Home:
- Buy, at a minimum, full replacement or replacement cost coverage. This means you will receive enough money to replace your home up to the limits specified in the policy.
- Buy a policy that covers the replacement cost of your possessions as well. Standard coverage only pays for the actual cash value (what the possession is worth today) rather than the replacement cost (what it would cost to actually replace your possession).
- Use the list of your valuables (your home inventory) to make sure that your policy's coverage matches the value of your possessions.
- If You Rent:
- Buy renter's insurance, which pays for damaged, destroyed or stolen personal property such as stereo equipment, personal computers, or jewelry. Your landlord's insurance won't cover damage to or loss of your possessions.
Choose the Right Deductible
A deductible is a dollar amount (say $500) that is not covered by the insurance policy. You will have to pay that dollar amount before the benefits of a policy apply. Generally speaking, the higher the deductible you choose to have in your insurance policy the less you will pay in annual premiums. But be careful! When deciding what your deductible(s) should be, look at your bank account. If you have $500 in your emergency fund you should have no more than a $500 deductible.
Prepare for "Other" Emergencies
Not all emergencies are caused by hurricanes, floods, and fires. These action steps can help you prepare for life's other unexpected financial crises.
- Create a detailed budget with your current income and expenses. From this budget, you want to create a "bare-bones" budget which reflects only those expenses that are needed for you to get through your difficult time.
- Start building up a savings fund that includes six months of living expenses.
- When disaster does strike, contact your creditors and let them know about your situation. The people you owe money to will tend to look more favorably upon late payments if they know your situation in advance.
Preparation Can Make a Difference
Don't just sit and hope you won't experience a natural disaster or personal catastrophe. Do the best you can to prepare for unexpected emergencies. It will make recovering from one a whole lot easier.