Prepare You and Your Family Financially
Conduct a household inventory: Inventory your household possessions by making a list and taking photos of everything you own. If disaster strikes, this list could:
- Help you prove the value of what you owned if those possessions are damaged or destroyed.
- Make it more likely you'll receive a fast, fair payment from your insurance company for your losses.
- Provide documentation for tax deductions you claim for your losses.
Buy insurance: Even with adequate time to prepare for a disaster, you still may suffer significant, unavoidable damage to your property. That's when insurance for renters or homeowners can be a big help. Yet, many people affected by recent disasters have been underinsured, or worse, not insured at all. Homeowners insurance doesn't cover floods and some other major disasters. Make sure you buy the insurance you need to protect against the perils you face.
If you own a home:
- Buy, at a minimum, full replacement or replacement cost coverage. This means the structure can be replaced up to the limits specified in the policy.
- Investigate buying a guaranteed replacement cost policy. When and where available, these policies can pay to rebuild your house, including improvements, at today's prices, regardless of the limits of the policy.
- Have your home periodically reappraised to be sure the policy reflects the real replacement cost.
Update the policy to include any home improvements, such as basement refinishing. Annual automatic increases may not be enough to cover these.
- Buy a policy that covers the replacement cost of your possessions. Standard coverage only pays for the actual cash value (replacement cost discounted for age or use).
- Be very clear about what the policy will and will not cover, and how the deductibles work (the part you pay before the policy pays).
- Check state-operated or federally operated insurance pools if you find it difficult to obtain private coverage because of a recent disaster. Premiums often run higher than market rates, but this is better than no coverage.
- Use your home inventory list to check that your policy's coverage matches the value of your possessions.
If you rent:
- Consider locating outside a high risk flood area or away from a fault line.
- Buy renter's insurance, which pays for damaged, destroyed, or stolen personal property. Your landlord's insurance won't cover damage to or loss of your possessions. Also, consider special coverage like flood insurance for your belongings.
- Be clear about what a policy will cover. Some policies cover more than others. For example, will the policy pay for living expenses if you have to live somewhere else temporarily, or for damage from sewer backup?
- Comparison shop for the best coverage at the best price. Other than government flood insurance, policies vary from company to company. Policies in most areas are very affordable. Start with the company that insures your car. Discounts are often available if you carry more than one policy with a company.
Where to keep cash: After a disaster, you may need cash for the first few days, or even several weeks. Income may stop if you can't work. To help stay solvent, consider the following:
- Keep a small amount of cash or traveler's checks at home in a place where you can get at it quickly in case of a sudden evacuation. A disaster can shut down local ATMs and banks. The money should be in small denominations for easier use.
- Set aside money in an emergency fund. That can be tough to do on a tight budget, but it can be well worth the effort. The fund can be very helpful, not only in a disaster, but in other financial crises, such as during unemployment or when unexpected expenses like legal fees arise.
- Keep your emergency funds in a safe, easily accessible account, such as a passbook savings account or a money market account.
- Keep some funds outside the local area, since the disaster that affects you could also affect your local financial institutions. A mutual fund money market account in another city or state is one option to consider.
- Keep your credit cards paid off. You may have to draw on them to tide you over.
Use an evacuation box: Buy a lockable, durable "evacuation box" to grab in the event of an emergency. Even a cardboard box would do. Put important papers into the box in sealed, waterproof plastic bags. Store the box in your home where you can get to it easily. Keep this box with you at all times, don't leave it in your unattended car. The box should be large enough to carry:
- A small amount of traveler's checks or cash and a few rolls of quarters.
- Negatives or CD's for irreplaceable personal photographs, protected in plastic sleeves.
- A list of emergency contacts that includes doctors, financial advisors, clergy, reputable repair contractors, and family members who live outside your area.
- Copies of important prescriptions for medicines and eyeglasses, and copies of children's immunization records.
- Health, dental, or prescription insurance cards or information.
- Copies of your auto, flood, renter's, or homeowners insurance policies (or at least policy numbers) and a list of insurance company telephone numbers.
- Copies of other important financial and family records (or at least a list of their locations). These would include deeds, titles, wills, a letter of instructions, birth and marriage certificates, passports, relevant employee benefits documents, the first two pages of the previous year's federal and state income tax returns, etc. Originals, other than wills, should be kept in a safe deposit box or at another location.
- Backups of computerized financial records.
- A list of bank account, loan, credit card, driver's license, investment account (brokerage and mutual funds), and Social Security numbers.
- Safe deposit box key.
Rent a safe deposit box: Safe deposit boxes are invaluable for protecting originals of important papers. If you don't have a safe deposit box, keep copies in your evacuation box or with family or friends. Original documents to store in a safe deposit box include:
- Deeds, titles, and other ownership records for your home, autos, RVs, boats, etc.
Birth certificates and naturalization papers.
- Marriage license/divorce papers and child custody papers.
- Passports and military/veteran papers.
- Appraisals of expensive jewelry and heirlooms.
- Certificates for stocks, bonds, and other investments.
- Trust agreements.
- Living wills, powers of attorney, and health care powers of attorney.
- Insurance policies (copies are sufficient).
- Home improvement records.
- Household inventory documentation.