When preparing for a natural disaster, don’t forget about your finances.
Earlier this month, two large earthquakes struck southern California: the first major quakes to rattle this area of the country in years. This has shaken many people out of complacency and caused them to rethink how well prepared they are, not just for an earthquake, but for any type of natural disaster.
But disaster preparation goes beyond stocking up on supplies like canned goods, water, batteries and flashlights. You should also think about how your finances could be affected and devise a financial disaster plan.
Start Planning Now
The time to create a financial disaster plan is now — not after you hear the tornado sirens start blaring or feel the earth start shaking. Start your financial disaster preparations by pulling together and organizing all of your critical financial and legal documents. Many people make the mistake of keeping these documents only in hard copy; in the event of a flood or fire this can lead to a huge loss of records. Storing key documents in a fire-proof safe and keeping an electronic record saved to the cloud with ample password protection (in case your computer is damaged) will allow you to access things if a disaster occurs. These typically include documents such as:
- Bank and brokerage account statements
- Insurance policies
- Mortgage, car loan and credit card statements
- Recent years’ tax returns and supporting documentation
- Estate planning documents (i.e. Will, Trust, Prenup, Business Formation Documents)
Make a list of the financial professionals you work with who you might need to get in touch with after a disaster, along with their contact information. This might include your banker, financial planner, insurance specialist and attorney. It might be a good idea to enter their names and contact info in your smartphone so you can access it easily after a disaster. Again, ensure you back up this information to a cloud account so you can access it on a new device if your phone is damaged.
Locate IDs and Medical Info
Next, locate forms of identification that you may need after the disaster to prove your identity and that of family members. These may include your driver’s licenses, Social Security cards, passports, marriage license and birth certificates. You will likely need to show IDs in order to apply for FEMA disaster recovery assistance as well as conduct other financial business post-disaster. Once again, store these in a fireproof safe and keeping an electronic copy on the cloud as a backup to prepare for the worst-case scenario.
Also locate important medical information you’ll need after the disaster — this may include health insurance identification cards, prescriptions for medications, immunization records and contact information for doctors you see on a regular basis.
Review Documents Thoroughly
Once you have gathered all of these documents and records, take some time to go through them and make sure they’re both accurate and timely. Homeowner’s insurance is a good example — you should ensure that your coverage is still enough to cover any potential loss or damage to your home. This is also a good time to make sure your last will and testament has been updated to reflect any changes that have occurred since it was first drafted.
Also make sure these documents are kept in a secure and easily accessible location, such as a waterproof and fireproof home safe or safe deposit box at the bank. Store password-protected electronic documents in the cloud or on an external hard drive that’s kept in a fireproof and waterproof safe or safe deposit box at the bank.
A Cash Stash and Preparing for Insurance Claims
Depending on the extent of the disaster damage, it may be difficult or impossible to withdraw cash from banks or ATMs for days or even weeks after the disaster. So it might be a good idea to keep some emergency cash in your home safe that you can use if the electricity is out for days or weeks. How much cash to stash will depend on your specific needs for everyday essentials like food, water, gasoline and other supplies.
A final disaster preparation financial tip: Take the time now to record all of your possessions on a video camera or your smartphone and keep the recording in a secure place, such as your home safe or bank safe deposit box as well as an electronic backup. This will help expedite the process of filling insurance claims for damaged or destroyed property as a result of the disaster.
Our Take: Don’t Put it Off
Many people put off this type of planning because they believe that natural disasters always happen “somewhere else.” Maybe … and maybe not. By creating a financial disaster plan now, you’ll be prepared if the next natural disaster strikes close to your home.
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.