Financially Preparing For Natural Disasters

7/9/2018

Financial preparation can make it easier to recover when a natural disaster disrupts your home, income, or everyday life. Building emergency savings, reviewing insurance coverage, securely storing important financial documents, maintaining a home inventory, and knowing how to access your money can help you respond to unexpected expenses. It is also important to understand your regular financial obligations, communicate with creditors if your income is disrupted, protect your credit, and watch for post-disaster scams. Preparing in advance can give you greater financial flexibility when an emergency occurs.

3 Key Takeaways

1. Prepare your finances before disaster strikes. Build an emergency fund, keep some emergency cash available, review your insurance coverage, and create a secure financial emergency file containing important account, insurance, identification, and property information.

2. Know how you'll manage bills and access money during an emergency. Keep a list of your regular financial obligations and creditor contact information. If a disaster affects your income, contact lenders, creditors, and your mortgage servicer as soon as possible to ask about available hardship options.

3. Protect yourself financially during recovery. Monitor your accounts and credit reports, document communications with creditors and insurers, and be alert for post-disaster scams involving fake assistance, contractors, charities, or government programs.

Hurricanes, floods, wildfires, tornadoes, earthquakes and severe storms can disrupt everyday life with little warning. While protecting yourself and your family should always come first, preparing your finances before a disaster can make the recovery process significantly easier.

A natural disaster can create expenses you never anticipated. You may need temporary housing, transportation, food, repairs or replacement belongings. Your workplace may temporarily close, utilities and internet service may be interrupted, and it may take time for insurance claims or disaster assistance to be processed.

Just as you prepare an emergency supply kit and evacuation plan, it is important to have a financial emergency plan.

Here are steps you can take now to help protect your financial well-being if disaster strikes.

1. Build an Emergency Fund

An emergency savings fund can provide an important financial cushion when the unexpected happens.

Following a natural disaster, you may face expenses before insurance proceeds or other assistance becomes available. You could also experience a temporary reduction or loss of income.

Ideally, work toward building enough savings to cover several months of essential expenses. If that feels unrealistic right now, don't let the size of the goal prevent you from starting. Even a smaller emergency fund can help pay for groceries, transportation, a hotel, insurance deductibles or other immediate expenses.

Consider keeping emergency savings in an account that is separate from your everyday spending money but still easily accessible when you need it.

2. Review Your Insurance Before You Need It

Do you know exactly what your homeowners or renters insurance covers?

Don't wait until after a disaster to find out.

Review your policies periodically and pay particular attention to:

• Coverage limits

• Deductibles

• Replacement cost versus actual cash value coverage

• Additional living expense coverage

• Coverage exclusions

• Requirements for flood, earthquake or other separate insurance

One particularly important point is that standard homeowners insurance generally does not cover flooding. Depending on where you live and the risks in your area, you may need separate flood or other specialized coverage.

Renters should also consider renters insurance. Your landlord's insurance generally protects the building, not your personal belongings.

Keep your insurance company's contact information and policy numbers somewhere you can access them even if you cannot return home.

3. Create a Financial Emergency File

Imagine having to leave your home quickly. Would you be able to access your important financial information from somewhere else?

Create a secure financial emergency file containing information such as:

• Bank and credit union account information

• Credit card and loan information

• Mortgage or rental information

• Insurance policies and contact information

• Identification documents

• Birth and marriage certificates

• Property records

• Vehicle information

• Tax records

• Employment information

• Medical and prescription information

• Wills, powers of attorney and other important legal documents

• Contact information for financial institutions and other important organizations

Keep physical copies of essential documents in a secure, fire-resistant and waterproof location. You may also want to maintain encrypted digital copies in a secure cloud-based service so they can be accessed if your physical documents are lost or damaged.

Protect digital files with strong passwords and multi-factor authentication.

4. Keep Some Emergency Cash Available

Credit and debit cards are convenient, but they rely on systems that may not always be available during a disaster.

Power outages and disruptions to internet and cellular networks can temporarily prevent businesses from processing electronic payments or make ATMs inaccessible.

Consider keeping a reasonable amount of cash as part of your emergency supplies. Smaller denominations may be particularly useful if businesses cannot make change.

How much you keep should depend on your household's circumstances and comfort level. There is no need to keep a large amount of cash at home, where it could potentially be lost or stolen.

5. Create a Home Inventory

If you had to file an insurance claim tomorrow, could you remember everything you own?

A home inventory can make documenting losses much easier.

Walk through your home and take photos or videos of your belongings, including furniture, electronics, appliances and other valuable items. Record serial numbers and save receipts for major purchases when possible.

Store the inventory somewhere other than solely on a device kept in your home. A secure cloud account can allow you to access the information even if your phone or computer is damaged.

Update your inventory periodically and after significant purchases.

6. Know Your Monthly Financial Obligations

A natural disaster does not automatically stop your bills.

Before an emergency occurs, create a list of your regular financial obligations, including your:

• Mortgage or rent

• Car payment

• Credit cards

• Personal loans

• Student loans

• Insurance

• Utilities

• Subscriptions and other recurring payments

Include the account number and contact information for each company.

If a disaster disrupts your income and you think you may have difficulty making payments, contact your creditors, lenders and mortgage servicer as soon as possible. Depending on the circumstances, assistance such as payment arrangements, fee waivers, adjusted repayment schedules or temporary forbearance may be available.

Don't simply stop making payments without contacting the company first.

7. Make Sure You Can Access Your Money

Think about what would happen if you could not visit your regular bank branch or receive mail at your home.

Make sure you know how to access your financial accounts online and that your contact information is current. If you use multi-factor authentication, make sure you have a backup method of accessing important accounts if your primary phone is lost or damaged.

You may also want to consider having more than one way to pay for necessities. Having a combination of available cash, a debit card and a credit card can provide additional flexibility during an emergency.

8. Protect Your Credit

Financial disruption after a disaster can sometimes lead to missed bills and credit problems.

If you have been affected by a disaster, communicate with lenders and creditors before missed payments begin whenever possible. Ask what disaster-related assistance they offer and how any payment arrangement could affect your account and credit reporting.

Continue reviewing your financial accounts and credit reports during the recovery period. This can also help you identify unauthorized activity or identity theft.

Keep records of conversations with creditors, insurers and assistance organizations, including dates, names, confirmation numbers and copies of correspondence.

9. Be Alert for Post-Disaster Scams

Unfortunately, scammers often take advantage of the confusion and urgency following a natural disaster.

Be cautious of people claiming to represent government agencies, insurance companies, charities or contractors, particularly if they pressure you to act immediately or provide personal or financial information.

Warning signs can include:

• Demands for immediate or upfront payment

• Requests for payment by gift card, cryptocurrency or wire transfer

• Unsolicited offers for disaster assistance

• Contractors who appear at your door and demand large upfront payments

• Requests for sensitive personal information

• Promises of guaranteed government grants or benefits

• Offers to negotiate with your mortgage company for an upfront fee

Verify someone's identity independently before providing personal information or money. If someone claims to represent an organization, contact that organization using a phone number or website you locate yourself rather than information supplied by the person contacting you.

10. Know Where to Turn for Help

If a disaster significantly affects your household finances, you may have options.

Government disaster assistance, insurance benefits, nonprofit organizations and creditor hardship programs may provide different forms of support depending on the event and your circumstances.

If you own a home and are concerned about making your mortgage payment, contact your mortgage servicer as soon as possible. A HUD-approved housing counseling agency can also help you understand your options.

If other debts have become difficult to manage because your income or expenses changed following a disaster, a nonprofit credit counselor can help you review your budget, debts and available options.

Prepare Before the Emergency

Financial preparedness cannot prevent a natural disaster, but it can give you more options when one occurs.

Start with a few manageable steps. Review your insurance policy. Photograph the contents of your home. Gather important account information. Put some money into emergency savings. Make sure you know how to contact your mortgage company, creditors and insurance provider.

Then make financial preparedness part of your household's overall emergency plan.

The goal isn't to predict every expense or situation you could encounter. It is to make sure that if the unexpected happens, you have the information, resources and financial flexibility you need to begin moving forward.

If a natural disaster or other emergency has disrupted your finances, Navicore Solutions' certified counselors can help you understand your financial situation, review your budget and explore available options.

 

 

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