Before Disaster Strikes
Fires . . . hurricanes. . . floods . . . earthquakes . . .
tornadoes.... Natural or other disasters can strike suddenly, at any time, and
anywhere. Your first priority, of course, would be to protect your
family and your property. But it's also important to protect against the
financial consequences of a disaster. A disaster can damage or destroy
your property, force you to temporarily live somewhere else, cut the
flow of wages and other income, or ruin valuable financial records.
Listed here are some simple, common sense steps you can take now. Before
you take any actions, however, you should be sure you have involved your
family or friends whenever possible in decision making and planning. You
also may want the assistance of an advisor, such as a Certified
Financial Planner, insurance agent, or similar financial
professional.
The important thing is to begin planning now, before the unexpected
becomes a harsh reality.
Protect your property
One of the first things to do is find out what disasters could strike
where you live----fire, flood, earthquake, hurricane, or tornado, for
example. The following steps can help you avoid or reduce substantially
the potential physical destruction to your property if you were to be
hit with a disaster. These steps can reduce your insurance costs, too. For example, you could:
-
Install smoke detectors to warn of an apartment or home fire.
- Elevate utilities to upper floor or attic.
- Clear surrounding bush to protect your home against wildfires.
- Anchor your house to the foundation, and anchor the roof to the
main frame.
- Secure objects that could fall and cause damage in an earthquake,
such as a bookcase or hot water heater.
- Install hurricane shutters on windows, and prepare plywood covers
for glass doors.
- Cover windows, turn off utilities, or move possessions to a safer
location if you have adequate warning of something like a
hurricane or flood.
- If your home is in a high risk flood area, on a fault line, or
threatened by coastal erosion, consider relocating.
- Have your house inspected by a building inspector or architect to
find out what structural improvements could prevent or reduce
major damage from disasters.
- If you haven't yet bought a house, you might take construction
type into account. Frame houses tend to withstand some disasters,
while brick homes hold up better in others.
If you're not sure where to start, you could contact your local fire
department. Fire departments will often
make house calls to evaluate your property and make suggestions on how
to improve safety. In earthquake-prone areas, the local utility can be
called upon to come to your location and show you how and where to shut
off gas lines or how to elevate utilities to get them above a possible
flood.
Conduct a household inventory
Inventory your household possessions by making a list of everything you
own. If disaster strikes, this list could:
- Help you prove the value of what you owned if those possessions
are damaged or destroyed.
- Make it more likely you'll receive a fast, fair payment from your
insurance company for your losses.
- Provide documentation for tax deductions you claim for your
losses.
To conduct a thorough home inventory:
-
Record the location of the originals of all important financial
and family documents, such as birth and marriage certificates,
wills, deeds, tax returns, insurance policies, and stock and bond
certificates. Keep the originals in a safe place and store copies
elsewhere. You'll need accessible records for tax and insurance
purposes.
- Make a visual or written record of your possessions. If you don't
own a camera or videotaping equipment (and can't borrow or rent
it), buy an inventory booklet and fill it out, or make a simple
list on notebook paper. Ask your insurance agent if he or she can
provide one.
- Go from room to room. Describe each item, when you bought it, and
how much it cost. If you're photographing or videotaping, have
someone open closet doors and hold up items.
- Record model and serial numbers.
- Include less expensive items, such as bath towels and clothes. Their costs add up if you have to replace them.
- Be sure you include items in your attic, basement, and garage.
- Note the quality of building materials, particularly for such
furnishings as oak doors or expensive plumbing fixtures.
- Photograph the exterior of your home. Include the
landscaping---that big tree in the front yard may not be insurable,
but it does increase the value of your property for tax purposes. Make special note of any improvements, such as a patio, fencing,
or outbuildings.
- Photograph cars, boats, and recreational vehicles.
- Make copies of receipts and cancelled checks for more valuable
items.
- Get professional appraisals of jewelry, collectibles, artwork, or
other items that are difficult to value. Update the appraisals
every two to three years.
- Update your inventory list annually.
Sound like too much work? Computer software programs designed for such
purposes can make the task much easier. These programs are readily
available in local computer stores.
Most important, once you have completed your inventory, leave a copy
with relatives or friends, or in a safe deposit box. Don't leave your
only copy at home, where it might be destroyed.
Buy insurance
Even with adequate time to prepare for a disaster, you still may suffer
significant, unavoidable damage to your property. That's when insurance
for renters or homeowners can be a big help. Yet, many people affected
by recent disasters have been underinsured-or worse-not insured at all. Homeowners insurance doesn't cover floods and some other major
disasters. Make sure you buy the insurance you need to protect against
the perils you face.
If you own a home:
-
Buy, at a minimum, full replacement or replacement cost coverage. This means the structure can be replaced up to the limits
specified in the policy.
- Investigate buying a guaranteed replacement cost policy. When and
where available, these policies can pay to rebuild your house,
including improvements, at today's prices, regardless of the
limits of the policy.
- Have your home periodically reappraised to be sure the policy
reflects the real replacement cost.
- Update the policy to include any home improvements, such as
basement refinishing. Annual automatic increases may not be enough
to cover these.
- Buy a policy that covers the replacement cost of your possessions. Standard coverage only pays for the actual cash value (replacement
cost discounted for age or use).
- Be very clear about what the policy will and will not cover, and
how the deductibles work (the part you pay before the policy
pays).
- Check government operated insurance pools if you
find it difficult to obtain private coverage because of a recent
disaster. Premiums often run higher than market rates, but this is
better than no coverage.
- Use your home inventory list to check that your policy's coverage
matches the value of your possessions.
If you rent:
- If you are renting, consider locating outside a high risk flood
area or away from a fault line.
- Buy renter's insurance, which pays for damaged, destroyed, or
stolen personal property. Your landlord's insurance won't cover
damage to or loss of your possessions. Also, consider special
coverage like flood insurance for your belongings.
- Be clear about what a policy will cover. Some policies cover more
than others. For example, will the policy pay for living expenses
if you have to live somewhere else temporarily, or for damage from
sewer backup?
- Comparison shop for the best coverage at the best price. Other
than government flood insurance, policies vary from company to
company. Policies in most areas are very affordable. Start with
the company that insures your car. Discounts are often available
if you carry more than one policy with a company.
If you are moving:
-
Select a home in an area not on a fault line, in a flood area, or
at risk from coastal erosion.
Consider special coverage
Insurance for renters and homeowners won't cover certain types of
losses. Ask your insurance agent or financial planner about special or
additional coverage for the following:
-
Floods- Homeowner policies don't cover damage from flooding. Call
your current insurance company or agent first about getting
coverage.
-
Earthquakes- Premiums typically are high, and deductibles may range
from 5% to 20% of the policy's coverage. Still, such coverage may be
better than no coverage. (Earthquake coverage for the contents of a home usually is
separate.)
-
Home offices- Some policies automatically extend coverage to
computer equipment and a few other items of business property. Talk
to your agent to determine what items would or would not be covered. If necessary, you could buy additional business coverage at a modest
cost. Or it may be better to buy a separate small business policy,
which would also provide more coverage.
-
Building codes- Ask your
agent about additional insurance to cover the costs of meeting new,
stricter building codes. Frequently, after a disaster people get
shocked with rebuilding costs that are much higher because building
codes have changed. All current codes must be met when rebuilding. Consider additional structural improvements that provide more
protection.
-
Other potential problems- This would include problems such as
underground mines (located beneath your property) sewer backup, or
mudslides.
-
Big-ticket items- Purchase additional coverage for specific jewelry,
collectibles, artwork, furs, or other big-ticket items.
Where to keep cash
After a disaster, you may need cash for the first few days, or even
several weeks. Income may stop if you can't work. To help stay solvent,
consider the following:
-
Keep a small amount of cash or traveler's checks at home in a
place where you can get at it quickly in case of a sudden
evacuation. A disaster can shut down local ATMs and banks. The
money should be in small denominations for easier use.
-
Set aside money in an emergency fund. That can be tough to do on a
tight budget, but it can be well worth the effort. The fund can be
very helpful, not only in a disaster, but in other financial
crises, such as during unemployment or when unexpected expenses
like legal fees arise.
-
Keep your emergency funds in a safe, easily accessible account,
such as a passbook savings account or a money market account.
-
Keep some funds outside the local area, since the disaster that
affects you could also affect your local financial institutions. A
mutual fund money market account in another city is one
option to consider.
-
Keep your credit cards paid off. You may have to draw on them to
tide you over.
Use an evacuation box
Buy a lockable, durable "evacuation box" to grab in the event of an
emergency. Even a cardboard box would do. Put important papers into the
box in sealed, waterproof plastic bags. Store the box in your home where
you can get to it easily. Keep this box with you at all times, don't
leave it in your unattended car.
The box should be large enough to carry:
-
A small amount of traveler's checks or cash and a few rolls of
quarters.
-
Negatives for irreplaceable personal photographs, protected in
plastic sleeves.
-
A list of emergency contacts that includes doctors, financial
advisors, clergy, reputable repair contractors, and family members
who live outside your area.
-
Copies of important prescriptions for medicines and eyeglasses,
and copies of children's immunization records.
-
Health, dental, or prescription insurance cards or information.
-
Copies of your auto, flood, renter's, or homeowners insurance
policies (or at least policy numbers) and a list of insurance
company telephone numbers.
-
Copies of other important financial and family records (or at
least a list of their locations). These would include deeds,
titles, wills, a letter of instructions, birth and marriage
certificates, passports, relevant employee benefits documents, the
first two pages of the previous year's income
tax returns, etc. Originals, other than wills, should be kept in a
safe deposit box or at another location.
-
Backups of computerized financial records.
-
A list of bank account, loan, credit card, driver's license,
investment account (brokerage and mutual funds), and Social
Security numbers.
- Safe deposit box key.
Rent a safe deposit box
Safe deposit boxes are invaluable for protecting originals of important
papers. If you don't have a safe deposit box, keep copies in your
evacuation box or with family or friends. Original documents to store in
a safe deposit box include:
-
Deeds, titles, and other ownership records for your home, autos,
RVs, boats, etc.
-
Birth certificates and naturalization papers.
-
Marriage license/divorce papers and child custody papers.
-
Passports and military/veteran papers.
-
Appraisals of expensive jewelry and heirlooms.
-
Certificates for stocks, bonds, and other investments.
-
Trust agreements.
-
Living wills, powers of attorney, and health care powers of
attorney.
-
Insurance policies (copies are sufficient).
-
Home improvement records.
-
Household inventory documentation.
Generally, originals of wills should not be kept in a safe deposit box
since the box may be sealed temporarily after death. Keep originals of
wills with your local registrar of wills or your attorney.
Deciding on a safe and convenient location is an issue. You may want to
consider renting a safe deposit box in a bank far enough away from your
home so it is not likely to be affected by the same disaster that
strikes your home (for instance, bank vaults have been flooded). Keep
the key to the safe deposit box in your evacuation box.
Home safes and fire boxes
Safes and fire boxes can be convenient places to store important papers. However, some disasters, such as hurricanes, floods, or tornadoes, could
destroy your home. Usually, it's better to store original papers in a
safe deposit box or at another location well away from your home.
If you have time...
Some disasters, such as tornadoes or earthquakes, strike with little or
no warning. Others, such as floods or hurricanes, may allow some time to
prepare. If there is enough time, you could take the following actions:
-
Decide what household items you would put on a very short priority
list. For example, imagine you could take only one suitcase or
pack a single carload. What would you take? Involve the whole
family in this discussion. Take jewelry and other small valuables.
-
Take irreplaceable heirlooms, mementos, and photos.
-
Don't bother with replaceable items such as televisions,
furniture, computers, and clothing (except what you need to wear
for a few days).
-
Be sure, however, to take a battery-powered radio and spare
batteries so you can stay informed.
-
Take important papers and computer disks if you have a home
business.
Whew! These are a lot of ideas. You may not be able to do everything
that is suggested---that's OK. Do what you can. Taking even limited
action now will go a long way toward preparing you financially before a
disaster strikes.
|
Fires . . . hurricanes. . . floods . . . earthquakes . . .
tornadoes.... Natural or other disasters can strike suddenly, at any time, and
anywhere. Your first priority, of course, would be to protect your
family and your property. But it's also important to protect against the
financial consequences of a disaster. A disaster can damage or destroy
your property, force you to temporarily live somewhere else, cut the
flow of wages and other income, or ruin valuable financial records.
