Preparing Financially for a Natural Disaster
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georger_gilbert Hurricane Sandy has come and gone, but the damage left in her wake will last for the foreseeable future. At a time of a great natural disaster, the last thing that you and your family want to be thinking about is your finances. While at least one bank was kind enough to forgive fees in Sandy's wake, most of your creditors will not be so generous. That's why it's important to prepare yourself for disasters, financially speaking, before they happen. Getting caught in one of these with no financial preparedness is just about the worst thing that can happen, so start getting ready today. (See also: 6 Items You Might Have Forgotten in Your Emergency Kit)
Make Sure You Have the Proper Insurance
It's good to have insurance for just about every conceivable catastrophe possible. If you live on the 20th story of a building in Dallas, chances are pretty good that you don't need flood insurance. Still, having fire insurance on the place is a good bet. Those living in flood zones should ensure that their renters or homeowners insurance actually covers this — in many cases it doesn't, and you need to buy a separate policy to protect yourself. For example, in California, an insurance policy will not cover damage from an earthquake. You need a separate policy for that, which is underwritten by the State of California. Know basic information about your insurance policy such as:
- What's covered?
- What's not covered?
- What's your deductible?
- How much is your coverage for?
- Is temporary housing included if you and your family are displaced?
These are all basic questions, but often times people do not inspect their insurance policies. Take the opportunity to do just that so you won't get an additional surprise after disaster strikes.
Keep Your Records Safe
You're going to want to keep financial records in a number of formats, both paper and digital. Paper is great to have because nothing beats the original copy. However, in the event of a disaster such as a flood or an earthquake that starts fires, these paper records won't hold up. You should back up everything by scanning it, then uploading it to a couple of different cloud-computing services to really cover yourself. If you have a Gmail account, you have access to cloud computing that's very easy to use — just send yourself an email or upload it to Google Drive, a free cloud storage service offered by Google. Mediafire is another free cloud-based service that doesn't even require registration. Literally anyone with a Facebook or a Twitter account can take advantage of it. Storing your stuff in a few different places ensures that you won't lose everything in the event that one of your storage sites gets done in like Mediafire.
Have a Fund in Place
It's good to have money in place for an emergency that's separate from your emergency savings. The money in this account isn't for things like fixing your car after it breaks down; it's physical money that you can access in the event of a natural disaster or similar emergency. Think of it as "under the mattress" money. It shouldn't be a significant part of your savings, but throwing a few dollars from every check under the floorboards of your bedroom will pay off on the day that ATMs are working they way they need to and you need baby formula.
Know How to Contact Your Creditors
In the event of a natural disaster, there's slim hope that your creditors are going to put your outstanding debts on hold. Having a card in your wallet that has the names of all your creditors and a number where you can reach them will at least help you to communicate with them. This allows you to inform them that a payment might be late and try to work with them to avoid accruing fees or defaulting. You can also use these numbers to negotiate for an increase in your credit line if this is necessary because you ran into expenses that you hadn't saved enough to cover, or your current credit limit couldn't cover them.
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Even if having a separate emergency fund for potential disasters like this was plausible, I'm not sure how much you could actually save to cover damages like those caused by Sandy. I think a lot of families have a hard time keeping enough money in one emergency fund, let alone two. Its scary to think about the financial losses that mother nature can cause.