Catastrophic events, ranging from natural disasters to terrorist attacks, have clearly demonstrated that the homes and livelihoods in which families have invested over many years can be wiped out in a matter of hours. Once displaced, many victims of disasters struggle to get back on their feet financially. While there is little you can do to prevent a disaster from striking, there are steps you can take to protect yourself and your family from financial ruin should you be forced to evacuate your home in an emergency.
Here are some strategies you can use to prepare financially for potential disasters:
Store important documents in an “evacuation box.” Collect and make copies of all your key financial and personal documents, including passports and birth certificates, wills, property deeds, insurance policies, mortgage records, car titles, and MF and bond certificates. Make copies of the front and back of all credit cards and driver licenses. Then make a list of all your account and credit card numbers, as well as a written and photographic inventory of all your valuables. You should also prepare an envelope with enough cash or travelers checks to last your family about three days.
All essential documents should be stored in a bank safe-deposit box located some distance from your home or in an airtight, waterproof, and fireproof safe or container that can be easily taken with you in an emergency evacuation. Inform family members or trusted friends of the location of the box in case you are not able to retrieve it yourself.
Make sure you have access to cash. Avoid tying up all of your assets in real estate or investments that cannot be tapped without incurring significant Loss/penalties. Maintaining funds equal to three to six months’ income in a savings or money market account should be among your top financial planning priorities. You may also want to have on hand several credit cards with high available balances or arrange in advance a line of credit that could be used in an emergency.
Purchase necessary insurance coverage and review your policies regularly. Many people who have lost their homes to disasters find their insurance policies do not cover the cost of rebuilding. If you have householder insurance, review your policy annually to ensure it reflects the actual replacement cost of your home and its contents. This is especially important if your home has risen significantly in value or if you have made improvements to the property. Be aware that your policy may not cover damage due to specific causes, such as flooding.
In addition to householder insurance, you should consider disability coverage to protect yourself and your family in case you are injured in a disaster and unable to work for a period of time. You should also make sure that your life insurance coverage is sufficient to meet the needs of your family. Keep in mind that it may be possible to withdraw some or all of the cash value from a life insurance policy, if necessary.
Your individual circumstances will ultimately determine what steps you should take to protect yourself and your family from a possible disaster. Remember, disasters strike with little or no warning—the time to prepare is now.