Protect Your Financial Life in the Event of a Disaster

By Lifestyle and BudgetFOXBusiness

If Mother Nature saw fit to destroy your home next week, how would that change your life?

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That’s a nightmare situation that has become a reality for the folks who used to live in the more than 1600 residences destroyed in the recent Colorado floods. Or you can ask last year’s victims of Hurricane Sandy, many of whom have yet to move back, how the superstorm forever changed their lives. Not to mention those who survived the monster-size tornado that took out a huge section of Joplin, Mo., in May 2011.

Those of us who live in areas prone to earthquakes, hurricanes, tornadoes, blizzards, flooding, brushfires and other types of natural disaster are often reminded to have a plan so that we and can survive physically. This usually means have a supply of fresh drinking water, food, batteries, a flashlight, emergency radio, blankets, candles, matches, etc.

But assuming you are fortunate enough to survive physically, have you prepared a disaster kit that will help you survive financially?  Do you have copies of your insurance policies? What numbers should you call? Where are you and your family going to stay until you can move back home? In the words of Ted Beck, president and CEO of the National endowment for Financial Education, or NEFE, “If there’s a disaster, how are you going to be able to continue your life?”

For instance, how will your cover your living expenses while you wait to move back home? Do you have access to cash? What if local ATMs are not operating? How about your bills? You might not have a home, but your mortgage company expects to receive the monthly installment on your outstanding loan. And don’t forget money owed to credit card companies, schools, utilities and medical providers. As Beck points out, “Bills aren’t suspended because you are not picking up your mail. Online banking is a help, but you have to stay current, especially on your insurance.”  Oh, and of course you know the passwords to all of your accounts, right?

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In conjunction with the Red Cross, NEFE, a non-profit organization “working to improve the financial capability of all Americans” developed a free brochure to help you be financially prepared in the event disaster strikes. You can access it here.

The key is to think things through before there’s a brushfire racing toward your backyard or three feet of water in your basement.

Beck knows a thing or two about surviving a natural disaster. He and his family were forced to evacuate their home during the so-called Oakland Hills firestorm of 1991. Ultimately, 25 people died and 150 more were injured by the fire, which raced through 1,500 densely-developed acres. It destroyed more than 400 apartments and condos and 3,354 single-family homes. Fortunately, Beck’s home wasn’t one of them.

But he didn’t know that for days as he and his family- including his wife, four children and a dog- crammed into a single hotel room, awaiting word that it was safe for them to go back home. Fortunately, Beck had prepared. He had cash, credit cards and copies of his insurance policies and other important documents.

Others were not so fortunate. Some just barely escaped the flames, and Beck recalls one resident who left so quickly he didn’t even have his wallet. “Fortunately, the hotel said ‘We’ll trust you.’ But he was totally at risk in the near-term. He had no idea where any of his records were, including his insurance policies.”

Still, though his home and family were safe, even a professional such as Beck learned he had not thought of everything. He and his wife “kicked ourselves” because, although they had advance notice about evacuating, they left the house without taking a single painting by her late stepfather.

Others delayed leaving because when given the order to evacuate they suddenly realize all of the things they want to take with them. As a result, they waste precious time gathering cherished mementos and photos, risking both their own lives as well as those of emergency workers.

Here’s a partial list of what you need to gather together in one place to be financially prepared in the event of an emergency or natural disaster:

1. Copies of all insurance policies and contact information. It’s important to know what is and isn’t covered. When is the last time you reviewed your coverage? Is it adequate? Unfortunately, many victims of the Colorado floods have learned that a typical homeowner's policy does not include flood damage. This is a separate policy. Note: You should have the originals in a safe deposit box.

2. Copies of other important documents such as military discharge paperwork, birth certificates, marriage license, deeds, wills, trusts, bank and brokerage accounts, etc.

3. An extensive list of the contents of your home so you can support an insurance claim. In the stress of the situation, it’s easy to forget items. While receipts are fine, a better approach is to photograph or videotape every room in your house. Pay special attention to artwork, family silver, jewelry and other unique and valuable items. Beck suggests saving photos and videos either on a remote data storage site or on a disk you place in a safe deposit box.

4. Identify ahead of time the things you absolutely can’t bear to leave behind- medications, personal items, photos, the dog’s leash- and have a plan to quickly gather these before you leave.

5. Don’t forget to gather key technology and the charger/power cord for each one. Your cell phone, for instance, so you can let loved ones know you’re safe and contact your insurance providers. A laptop can be invaluable when it comes to filing claims, gathering information and paying bills. But be sure you bring a list of the passwords you use for key accounts. If you can’t remember all of them, list them on your password-protected smart phone.

6. Credit cards and enough cash to get you through a few days of expenses in the event banks are closed.

Again, the above list is not exhaustive. It’s just a start and Beck suggests asking yourself, “'What would I really regret if I left without it?’ The list is surprisingly short, but it’s a good exercise.”

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