Organize and manage your finances before and after a natural disaster.
You can never be 100% sure of just when a natural disaster will strike, nor can you predict the damage (and the cost). The best anyone can do is be prepared with a list of precautions and contingencies for before, during, and after the disaster. Managing your finances is especially important, as is coming up with a plan of action. Don’t worry, we can help you get started.
Before the disaster
Sometimes you know when a natural disaster is making its way to your state or city. Oftentimes, they take us by surprise, which is why it’s always good to take some necessary precautions and be prepared.
Insurance is a lot like a safety net: easy to take for granted until the moment you need it. Some customers pay their premiums for years and are fortunate enough to never file a claim. That can make insurance seem like a costly investment with no immediate pay-off, especially when the basic home insurance policies can have you paying between $500 and $1,000 a year.
Nevertheless, your costs to repair an underinsured home or car damaged in a disaster could be astronomical compared to the cost of your policies. The same applies to an apartment dweller shouldering the entire cost of replacing damaged personal belongings without the benefit of renters insurance. Let’s explore this in a little more detail.
- What is homeowners insurance?
Homeowners insurance comes in a variety of policies that help protect the structure of the home and personal property inside it. Based on your policy and the covered perils, these factors could include weather, burglary, flooding, etc.
- What is auto insurance?
Auto insurance (sometimes called “vehicle insurance”) is designed primarily to help protect drivers (and their cars) who have been involved in accidents. Optional comprehensive policies will also help cover cars that have been damaged in a natural disaster.
- What is renters insurance?
Unlike homeowners insurance, renters insurance is designed to protect the tenant’s personal belongings. Policies can cover a variety of perils including fire, theft, and vandalism. Because these policies are geared toward personal belongings and not the residence itself, they can be significantly cheaper than homeowners insurance policies.
There are other types of property insurance, but those are the big three. Now that we know the basics, let’s answer another very important question: Is insurance worth it? While the policy costs will ultimately vary based on location and other factors, we can attempt to generalize these costs in the following visual.
|Homeowners insurance||About $35 per month for every $100,000 of home value*|
|Auto insurance||Average amount spent to insure a car in the U.S. was $815 a year (2012)**|
|Renters insurance||About $184 a year***|
Compare those policy estimates with the tens of thousands of dollars you could pay for uninsured or underinsured damages and it’s easy to see why insurance is worth it. Plus, you can often offset the costs by bundling multiple plans (home + auto) and making improvements to your home (smoke detectors, for example). Just make sure you fully understand the details of your policies so you know exactly what will be covered. It’s also wise to take photos of your possessions, home, and vehicle to make filing a claim easier down the road.
A poll by the American Red Cross found that less than half of the parents discussed fire safety with their families. And that was just when it came to fires. Home emergencies can come in many forms including flooding, hurricanes, and blizzards. Having an emergency plan can make all the difference in the world.
Fire emergency plan [Download PDF]
- Determine all possible exits including doors and windows.
- Make sure every bedroom has two exits (including windows).
- Purchase a fire extinguisher and make sure everyone knows its location.
- Familiarize yourself with the use of a fire extinguisher.
- Create a drawing of your house floor plan and highlight all possible escape routes.
- Designate a safe spot to meet outside of the home (example: in front of neighbor’s house).
- Ensure that the street number for your house is visible for fire trucks to see.
- Check batteries in smoke detectors regularly (about once twice a month).
- Assign family members to assist any infants, elderly, or disabled residents.
- Practice the escape plan at least once a month.
Hurricane emergency plan [Download PDF]
- Trim or remove damaged branches or trees prior to hurricane season.
- Secure rain gutters and downspouts and clear away any clogs.
- Look into purchasing a portable generator in case of power outages.
- Designate a safe room everyone can reach.
- Familiarize yourself with local hurricane evacuation routes.
- Put together a bug-out bag with flashlight, batteries, first aid, etc.
- Purchase necessities like water and food in the event that roads are closed.
- Consider hurricane shutters for your windows.
Flood emergency plan [Download PDF]
- Look into flood insurance for your area.
- Bring in any outdoor furniture.
- Disconnect any electrical appliances.
- Turn off gas and/or electricity main valves to avoid fires and explosions.
- Assess flood risk areas in your home (near a hill, basements, etc.).
- Designate high-ground meeting place in the event of major flooding.
- Familiarize yourself with evacuation routes.
- Build an emergency preparedness kit with first-aid, food, flashlight, batteries, etc.
- Only return home when authorities deem it safe.
- After the flood, photograph property damage for insurance purposes.
Blizzard emergency plan [Download PDF]
- Prepare an emergency preparedness kit sufficient for at least 3 days.
- Only use an electric space heater with auto shut-off valve and no glowing part.
- Consult a contractor to determine home’s structural integrity and insulation needs.
- Make sure your carbon monoxide detector is working properly.
- Ensure there is a fire extinguisher handy in the event of a house fire caused by heat source.
- Learn how to shut off the water valves to avoid cracked or burst pipes.
- Cover windows with plastic or install storm windows to keep cold air out.
- Make sure you have plenty of blankets, sleeping bags, and winter coats.
- Have your mechanic check your car’s antifreeze, defroster, brakes, heater, tires, and wipers.
- Place another emergency preparedness kit in the car.
- Keep pets indoors.
- Know how to operate manual release lever for electric garage door.
- Check on neighbors when weather permits.
What about the pets?
- Designate a family member responsible for evacuating the pets.
- Purchase a sticker letting emergency services know you have pets inside.
- Add treats and large freezer bags of pet food to the emergency preparedness kit.
And while it’s true that you should always prioritize the lives of your loved ones during an emergency, that doesn’t mean you should forget about important financial documents. Prior to a home emergency, you should put together a contingency plan to preserve all of your important licenses, certifications, ID, bank information, and other financial documents. We’ll cover this in more detail when we talk about bug-out bags.
An emergency fund is a cash buffer that helps soften the blow whenever life throws the occasional curveball. As Dave Ramsey puts it best, “The reason to have an emergency fund is simple: You don’t know what’s going to happen.” This is especially true when it comes to natural disasters, but where do you start? Here are a few steps to help you get started:
- Determine your income (and your spouse’s)
- Find a safe but easily accessible place to put the fund
- Deduct a reasonable amount of money from your income and put it in the fund
- Continue to do this until you have six months’ salary worth of cash
Ultimately, these steps will vary based on your income and how much you’re willing to put aside each month. You might also want to invest in a fire-resistant lockbox to keep all of that flammable cash safe and sound. There are also budgetary tweaks you could make to your day-to-day life to have more money for the fund. Things like eating out less and limiting your Starbucks purchases can really add up.
Things are getting increasingly more automated as technology continues to evolve and the same is true for bill payment. Many different utilities, insurance providers, and credit card providers now offer the option for auto-payment. You either go online and opt for this in your account settings or you can call a representative and they can walk you through it.
Among the many benefits of auto-payments is that you can rest assured your bills are being paid. As long as the card and account you associate with the process are current, you don’t have to worry about sending any payments via mail. That means that, even during a disaster, you’re still able to keep up with those monthly payments.
A bug-out bag is usually filled with everything you’ll need in the event of an emergency. This can include first aid, MREs (Meals Ready to Eat), batteries, flashlights, important documents, etc. By having these, you don’t need to worry about gathering up necessary provisions. All you need to do is grab the bag and head out the door.
Here’s a list of things you should include in your own bug-out bag [Download PDF]:
- Bank account records
- Copies of insurance policies
- Water (enough for everyone for 3 days – a gallon per person per day)
- Food (non-perishable, enough for 3 days)
- Garbage bags
- Manual can opener
- Cellphones (including charger and backup batteries)
- Prescription medications
- Other meds (painkillers, laxatives, antacids, etc.)
- Baby supplies (formula, diapers, wipes, powder, etc.)
- Pet food and water
- Paper and pencil
- Matches in waterproof container
- Feminine hygiene supplies
We recommend placing these and other essentials in a backpack you can easily sling around your shoulders. You might need multiple bags to carry other essentials like sleeping bags, emergency blankets, and changes of clothes. A great place to store these bags is in the same place where you’re keeping your emergency fund.
During and after a disaster
So disaster has struck and you’re riding out the storm. Now, more than ever, you need to keep up with your finances and prioritize your costs and responsibilities.
One of the first things you’ll want to do in the wake of a natural disaster is make sure everyone is safe. Once that has been established, it’s time to assess the damage to your property. You’ll want to make sure you file a claim with the applicable insurance policies you’ve taken out on your home, car, or apartment. Here’s how you get started:
- Call your insurance agent or local company representative.
- Fill out the claims forms properly (your agent will send these along).
- Your insurance provider will likely want to arrange for an adjuster to visit.
- Prepare a list of damaged items or property for the insurance adjuster.
- Take photos and video of the the damage.
- Keep careful documentation of all important paperwork.
- Payment will be sent once you and your insurance company reach a settlement.
This is generally how it can go with home and renters insurance claims. A similar process can take shape for filing an auto insurance claim. Make sure you keep copies of everything from your claims form to anything the adjuster hands over.
FEMA can provide disaster assistance to homeowners in the wake of a major disaster. In order to see if you qualify, you’ll need to visit the site disasterassistance.gov. Once you’ve applied online and filled out all the necessary information, you should get a call from FEMA within 10 days of submitting the application. A home inspection will be scheduled and, if you qualify for assistance, you’ll receive a check by mail or a direct deposit to your checking account.
This assistance is extended to homeowners, small businesses, and even renters. By law, FEMA assistance cannot duplicate assistance received from insurance claims, but you could receive assistance on items that were not covered by insurance.
No one wants to get penalized for late credit card payments and you might have some room to breathe given the extenuating circumstances. Contact your creditor(s) to let them know the situation, and they may be able to work with you to prevent any negative impact to your credit score.
In some cases, a lender can’t report any delinquent payments until a full 30 days after the due date. That doesn’t mean you should get into the habit of paying late.
If your home requires repairs and you won’t be able to live it in for a month or more, consider halting utility services. There’s no reason you should be paying for electricity and water if you’re not able to use any of it. In such an event, contact your utility service and have them temporarily suspend service.
All anyone can do in situations like these is do their best to be prepared. By having a plan going into a natural disaster you’ll have the tools necessary to minimize the financial impact of it. Then, in the aftermath, you’ll have the tools and information necessary to pick up the pieces and move on.