Natural disasters are difficult to prepare for and the wake of damage they create can linger long after the danger subsides. The total impact of disasters like Hurricane Sandy, the drought in the Corn Belt, the Colorado wild fires and the more than two dozen tornadoes that hit the South last January is massive. It can take a toll on personal, state and federal balance sheets.
As with most things in life, the key to financially surviving the aftermath of a natural disaster is careful planning for the unknown. Pat O’Connell, senior vice president of the Ameriprise Advisor Group at Ameriprise Financial suggests these tips, designed to help you prepare for an event that you don’t necessarily plan on.
1. Prepare a financial emergency kit. Include things like extra cash, a written or photographed inventory of all of your belongings, a recent backup of your computer files on a flash drive, insurance records, and information for your bank accounts, credit cards and investment accounts. You may also choose to keep social security cards, birth certificates, wills and deeds in the same place. Store them in a sturdy, water and fire proof container. Keep your emergency kit in a location where you would seek shelter in the event of a storm or in an easy-to-access spot if an evacuation is necessary.
2. Disaster-proof your home. There are several basic improvements you can make to help protect your home from disaster. Before you reach for the hammer, however, talk with your insurance agent and determine whether changes change your insurance premiums. Things like strengthening entry doors, securing and bracing the roof with heavy duty anchors, caulking openings around doors and windows, covering attic and crawl space vents, replacing an aging roof and installing window shutters may help if disaster strikes. They might also increase the value of your home as well.
3. Protect your property and possessions. No matter what you do to protect yourself and your home, some disasters cause unavoidable property damage. You can improve your recovery from such disasters with renter’s or homeowner’s insurance. Full replacement cost coverage, for example, will help eliminate any out-of-pocket costs if a disaster does destroy your possessions or home. Take note that homeowner’s insurance doesn’t always cover every loss. Ask your agent about any additional coverage you need in the event of a flood or earthquake. If you live in an area that’s not prone to a certain kind of environmental event (like a flood) but it’s possible that it could occur and damage your home, consider the appropriate insurance coverage. Also consider adding a “rider” to your policy to protect expensive possessions like jewelry, antiques or home office equipment.
4. Complete a home inventory. A written and photographed inventory of possessions in your home is one of the most reliable documents for those who experience a catastrophic loss of property and possessions. In just a few hours, you can list everything you own, take a few photos or video of certain possessions and store copies both in your emergency readiness kit and at your workplace or other location for safe keeping. If a disaster happens, this inventory of your belongings will help insurance adjusters value your possessions and speed up the replacement process.
5. Create an emergency financial plan. A traditional financial plan is designed to help you prepare for life events like your child’s college education and your retirement. With just a little more thought and planning, you can also protect yourself from financial devastation if a disaster strikes. One of the first steps to consider is creating an emergency savings account. You should aim to save the equivalent of three to six months of normal living expenses that you can easily access following a disaster or life crisis – like a divorce or sudden disability. Set up a savings account and consider doing an automatic payroll deduction as a painless way to save for potential emergencies. You’ll be glad you have the extra money when you need it most.
Unexpected environmental disasters will never be predictable, but they can be planned for. Consider meeting with a financial advisor who can help you determine what types of insurance coverage are right for you and your family, and how to begin saving for any kind of emergency.
Be sure to ask your sales representative about the insurance policy’s features, benefits and fees, and whether the insurance is appropriate for you, based upon your financial situation and objectives.
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