Financial Protection During Physical Storms

When I was young, I would spend a week with each of my grandparents. I can remember one summer at the farm when my cousin was there as well. It was one of those days when you knew something was going to happen. The wind was blowing, the clouds were dark and mean, the humidity was about 110%, and Grandma was keeping us particularly close to the house. Standing in the yard, my cousin and I looked up to see what looked like two lines of clouds smashing into each other.

“See that?” he asked. “That’s how tornadoes start.”

I’ll never forget the anxiety I felt at that moment. Of course we ended up without any severe weather that day, but it was enough to stick in my brain. It’s that time of year and, as I hear the tests of the emergency broadcast system, I can still remember the sight of those clouds mashing together over our heads.

It’s that season, and this blog is dedicated to emergency preparedness. noaa tornado damageStorms and financial preparedness? That’s right. Nothing says high cost like repairing and rebuilding from storm damage. So here are three areas in which to be prepared as we head into ‘The Season’.

Prepare Your Red File.

While a Red File doesn’t actually have to be red, it is an important piece for you to put together. A Red File is simply a single collection of all the most important documents that is kept in a semi-accessible location. The idea is that, should you need to evacuate quickly, you will have the critical information with you. This would include:

  • Passport or copy of driver’s license
  • Birth/marriage certificates
  • Social Security cards
  • Loan documents
  • Vehicle titles
  • Bank account numbers and locations
  • Credit card account information
  • Insurance policy information
  • Will or power of attorney
  • Emergency contacts information
  • Prescription information
  • Safe deposit box key/location
  • Backup of computer information/passwords
  • Cash

Ideally, all of this is in a secure briefcase-style safe that is semi-accessible for you to grab and go. Should your home be destroyed (along with anything in it), these will be the critical pieces for you to begin rebuilding.

Check Your Coverage.

Now is a great time to check your insurance coverage. We as Americans tend to accumulate stuff. Usually our stuff has value. Unfortunately we often forget to adjust our insurance coverage for anything other than the largest purchases like a new home or vehicle. Talk to your agent and identify if you have any property that is worth more than your coverage limits. Common categories for this problem are electronics, art or jewelry, and firearms.

Also talk to your agent about any additional coverage you may need. Many people don’t think they need to worry about water because they have a sump pump. Unfortunately, the storms that often bring torrents of rain also tend to knock out the electricity. If you have an electric sump pump, it will quickly become nothing more than a doorstop without electricity. There may be additional coverage for other disasters as well that can be worth the increased premiums.

One final item to discuss with your insurance agent is your deductible. Should you have a claim, this is the amount deducted from the total claim that you end up paying out of pocket. A higher deductible means a lower cost of insurance for you. It also means that, should you have to repair something, you are paying more of the bill yourself. This isn’t bad as long as you increase your emergency savings to account for the increased exposure of a higher deductible.

Do You Have Help?

Insurance can take care of the repairs after the fact. You may want to consider having help in place for the immediate problems. As mentioned above, storms often cut electrical service leaving your sump pump completely nonfunctional. There are battery backup systems to keep the pump running as long as a few hours. There are also non-electrical backup systems that will keep the water out of the sump hole.

You may also consider a generator. This can keep the essentials around the house running. Depending on the season, you may want to keep a refrigerator or freezer running occasionally or turn the furnace on to warm the house a bit. Just be sure to keep the generator outside of the house so you don’t fall victim to carbon monoxide poisoning.

Emergency resources may be a good topic to chat about with your neighbors. The last time we lost power, I ran a cord from my neighbor’s generator to keep my furnace running. I refilled his gas can for him and we were all warmer. While there may be a cost for some emergency resources, you may be able to share that cost. Also, keep in touch with your neighbors if you are going to be out of town. Should severe weather strike, they can at least keep you informed rather than the rain pouring in unattended for a week until you get home.

While I hope you never fall victim to a natural disaster, I also know even the best meteorologists can only predict the weather, not control it. In order to minimize the financial impact, a little preparedness can make a big difference. You will have enough to deal with in a crisis, so make sure you have the tools you need at your disposal.

Should disaster strike and you could use some help recovering, the Center for Financial Resources counselors are here to help. As LSS is a disaster relief/management organization, we are called on to help people recover when Mother Nature has decided to spread their information across the county. We can help you too.

written by Breck Miller
image courtesy NOAA.gov

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