Hurricanes, wildfires and earthquakes — oh, my! With all that’s been going on in the news lately, it’s hard not to imagine yourself in a terrifying flood or other natural disaster. After all, your Facebook feed is probably covered in images of rising water and desperate people.
So what would you do? If this question has crossed your mind over the past weeks and months, don’t let it just be fodder for your nightmares. Now’s the perfect time to take your anxiety about how you would react to a doomsday scenario and turn it into an actual plan.
Though your action plan for your physical safety will vary according to where you live and what kinds of threats are most common in your area, your financial safety plan is just as important — and this is something you can put together right now. Here’s what you need to know.
Review Your Insurance
Being properly insured is absolutely critical when it comes to weathering a major storm or riding out another disaster. After all, this is exactly what insurance is designed to do: pay you to replace lost property. If you don’t have it, you’ll be on the hook for rebuilding your house, buying a new car or replacing all your stuff.
The bottom line? You may think insurance is expensive, but it’s nowhere near as costly as trying to replace everything you own all at once.
If you’re already insured, take some time to review your policies and think about whether your coverage is adequate. You should definitely have these policies in place:
- Homeowners Insurance: These policies will pay to help you rebuild you home. They’ll also cover your garage, outbuildings and the contents of your home. Check to see whether your coverage is actual cash value or current replacement costs and run some numbers to see what’s best for your situation. Smart shopping will help reduce your costs while keeping you covered for emergencies.
- Renters Insurance: You’re not off the hook if you don’t own a house! Don’t be fooled into thinking your landlord’s insurance will cover you — it won’t. You need your own insurance policy to pay for any items lost if the roof blows off your apartment building. Fortunately, renters insurance is usually very affordable.
- Car Insurance: Most states require a minimum basic policy for drivers, but make sure yours also covers “acts of God” and damage to your vehicle. A bare-bone liability policy won’t cut it if your car is swept away in a flood, so make sure you’re covered for other events. If you’re worried about the cost, you can play around with the deductible-premium ratio for additional savings.
- Flood Insurance: Standard homeowners insurance does not cover flood damage. Some people who live in floodplains are already required to buy this extra insurance, but events like the 50-plus inches of rain from Hurricane Harvey can cause flooding anywhere. Climate change makes this insurance more important than ever.
Get Your Emergency Fund Ready
If you’re ever forced to evacuate your home — or even your state — it’s hard to predict the toll this can take on your finances. Will you be able to afford a hotel room? What about food while you’re gone? What happens if your workplace is knocked out of commission and you don’t have any income for a month?
All of these what-ifs make having an emergency fund crucial. Once you run some calculations to figure out how much money you need in your emergency fund, it’s time to decide where you want to keep the money. You’ll want to be able to access it quickly from anywhere you go, so fancy investments aren’t a good idea. Consider a bank account that’s attached to an ATM card for easy access to your funds. A checking account at a major national bank could be ideal, and paper checks are very handy if you get stuck somewhere without power —ATMs need electricity, too!
Even when you’re prepared with an ATM card and checks that link to your emergency fund, it’s always smart to have cash on hand. It’s up to you how much cash you feel comfortable carrying, but do keep your dough in small bills to avoid problems when you need to pay for small items.
Deal With Your Documents
Your financial life involves a lot of paperwork, and this all needs to be protected when you’re in the path of a natural disaster. A lot of paperwork can be kept as PDF files and uploaded into a cloud-based service like Google docs or Dropbox so you can access them anywhere. When you have the time, it’s a good idea to scan important papers that you don’t have an electronic version of so you have a robust digital file cabinet just in case.
You might also consider photocopying important papers to carry with you in the event of a mandatory evacuation. Having a copy of your personal IDs, bank account numbers, insurance policies and more can be a major comfort, and it’s a practical way to make sure you can get down to business when you need to access your money or file an insurance claim. If you want to keep originals with you, invest in a small, portable safe that you can carry. These are often heavy, but secure, fireproof lockboxes with a handle can be toted to your car for your trip to safety.
Here are the documents and important paperwork you need to secure:
- birth certificates
- photo ID, like driver’s licenses and passports
- social security cards
- insurance policies
- most recent tax return
- a recent pay stub
- immunization records
- your doctor’s contact information
- a list of your current prescriptions
- health insurance cards
- bank account numbers
Finally, it’s also a good idea to have photographs or a short video of your house and its contents to back up any insurance claims you may need to make. Upload these to your cloud-based financial file cabinet so you have them within reach when you need to work with your insurance company to file a claim.
It may take a weekend to get your ducks in a row when it comes to squaring away your emergency fund and paperwork, but it’s well worth the effort for the peace of mind it will bring you. Make a note to get started today, and you’ll be financially ready for anything that comes your way.
