Don't Let a Natural Disaster Turn into a Financial Disaster

“I thought it would never happen to me.” It’s a phrase you often hear when stories about natural disasters break in the news. Disasters such as Hurricane Sandy, a variety of tornadoes and floods are reminders that disaster can strike at any time. While you can’t stop a natural catastrophe, you can take steps to prevent it from becoming a financial disaster.

Think about how people try to protect themselves from unexpected risks every day. They carry homeowner’s insurance to cover costs from damage or potential liability on their property. The same is true with car insurance. Many people own life insurance, particularly if they have a family to look after. These are prime examples of protecting against unexpected events. Yet people don’t always think to protect themselves from natural disasters.

When it comes to threats like hurricanes and tornadoes, the first priority is to make sure your family stays safe. That requires an evacuation or shelter plan to avoid personal harm. Be cognizant of warnings that are posted and respond to them quickly.

Sufficient property protection

A good example of being unprepared for a natural disaster is the failure to purchase flood insurance. Most homeowner’s insurance policies don’t cover damage from floods, so those who live in flood-prone areas should purchase flood insurance, which is provided by the U.S. government. Even if you think there’s little risk of flood damage where you live, you may be surprised. For example, if you live near small streams that could rise dramatically in heavy rains, you may face a flood risk.

Although floods may not typically be covered by homeowner’s insurance, other types of damage may be. Check your insurance coverage to be certain that the cost of replacing your home is covered by your policy and any exceptions to coverage that are spelled out in the policy.

Other way to prepare

Your home and personal property aren’t the only areas of concern. Other issues you should prepare for include:

• Safekeeping of records and financial documents – You need copies of important identification available, everything from driver’s licenses to passports to Social Security cards. You also need to be able to access documents such as insurance policies and financial statements of various savings, checking and investment accounts. Storing some of this information electronically in a remote location (such as through a cloud server) is one solution. Storing hard copies in a location such as a bank safety deposit box is also a good idea.

• Creating an emergency fund – When unanticipated events occur, a safety cushion liquid savings can make all the difference for the individuals and families involved. Saving for the unexpected may seem like a drag, but when a sudden expense arises, you’ll be happy you planned for it.

• Protecting your business – If you own a business, it is important to protect physical property, but that’s just the beginning. If your business is forced to close due to damage, you should have business interruption insurance to cover costs of ongoing operations when income is not being generated.

• Avoiding scams – It seems that when people are most vulnerable, scam artists go to work trying to obtain personal financial information in the guise of helping victims obtain assistance. Only deal directly with agencies and government entities, and don’t take up offers of support from “middlemen” claiming to look out for your interests.

We all hope that we’re never struck by a natural disaster, but the key to avoiding a financial catastrophe is to plan ahead and make sure you are prepared for the worst-case scenarios. Given the experiences many people have endured in recent years, it will be time well spent.

Rob Davis lives in University Place with his wife Lorri and sons Wesley and Parker. He is a Financial Advisor and CERTIFIED FINANCIAL PLANNER practitioner™ with Ameriprise Financial Services, Inc. in Tacoma, Washington. Rob specializes in fee-based financial planning and asset management strategies and has been in practice for 37 years. He is licensed/registered to do business with U.S. residents only in the states of Washington, Idaho, Arizona and California. You may contact Rob at ameripriseadvisors.com/robert.g.davis.

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