|
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 may also 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 brush to protect you 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 or 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 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 a 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 uninsured -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:
Top
?
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 area 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.
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 socked 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 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.
This 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
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.
?
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 items such as heirlooms, mementoes, and
photos
?
Don’t bother with replaceable items such as televisions, furniture,
computers, and clothing (except what you would 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.
Back To
Top
 |
