When Mother Nature hurls a nasty surprise your way -- as in ahurricane, tornado, earthquake, flash flood or forest fire -- would yoube financially prepared to weather the storm?
Hurricane Katrina should serve as a wake-up call for everyone-- particularly for people who live in areas prone to naturaldisasters. The damage caused by this powerful storm is estimated to bemore than $34 billion in insured losses, analysts say.
But you don't have to let your finances take a direct hit.
Here are six ways to prepare for a disaster:
1. Carry insurance
It may seem obvious, but many people are either underinsuredor not insured at all, particularly for special coverage such asfloods, earthquakes and hurricanes.
According to the Federal Emergency Management Agency, only 25percent of the 10 million American homes that lie within highflood-risk zones carry flood insurance. This, despite the fact thathomes are four times more likely to be damaged by flood than by fire.
2. Be sure you have the right kind of coverage
"The first line of defense is insurance. Make sure you haveadequately assessed your insurance coverage before disaster strikes,"says Stewart H. Welch III, a certified financial planner and founder ofThe Welch Group, a wealth management firm in Birmingham, Ala.
"Sit down with someone such as the agent who writes yourcasualty policy and review all your insurance options.""Make sure you understand what coverage you really have," saysAlan Goldfarb, a certified financial planner in Dallas. "For instance,there's a difference between replacement and reimbursement cost. Let'ssay your 3-year-old television was destroyed. Does your coverage giveyou the current value of your TV or what it would cost to replace itwith a new one?"Cover the contents of your home, as well as the structure. Ifyou're a renter, buy renter's insurance. The landlord's insurance won'tcover damage to your possessions.3. Start an emergency fundOnce you've done everything you can on the insurance side andyou feel like there still are deficiencies, you need to self-insure.Do that with an emergency reserve account."The reality is that everyone needs to have an emergency fund,but not enough of us have them," says Wayne von Borstel, a certifiedfinancial planner and founder of a wealth management firm in TheDalles, Ore.The experts suggest using a payroll deduction plan or settingup an automatic deduction from your checking account to build youraccount. Start small if necessary, but contribute.
"Financial planning is like eating an elephant," he says. "Itsometimes seems hard, but if you start small and keep going, you canget it all done."Having enough cash to live on for at least three months can bea godsend during a disaster.4.Take a home inventoryMakea visual record of your possessions with a still or video camera. Goroom-by-room and take an inventory of all the items inside. Describethe item, its cost and when you bought it. Note any serial numbers ormodel numbers. Photograph the exterior of your house, includinglandscaping, patio, fencing and sprinkler system. Include automobiles,boats and RVs in your inventory and photographs. Review your inventoryevery two to three years to keep it up-to-date. Augment the video orphotographs with a written record. List each item and its value as wellas any identifying numbers where appropriate. Put your inventoryrecords in a safe place such as a safe-deposit box.5. Get a professional appraisalJewelry,art, coins, stamp collections and other valuables may need aprofessional appraisal to support any insurance or tax deductionclaims. Be sure your current insurance policy provides adequatecoverage limits for these items, or have riders for them.6. Keep copies of all financialrecords in a safe place
Goldfarbsuggests using a service that scans all of your important financial documentsand keeps them in a secure vault on a Web site encoded with specialpasswords."A secure Web site is impervious toweather conditions, a local disaster or even the failure of your harddrive. You can scan anything -- passports, birth certificates, life andhomeowners insurance policies, marriage licenses or wills. Almostanything that's written can be stored and easily available to you froma computer."If you don't want to pay a monthly fee fora service, Goldfarb suggested scanning the documents yourself andburning your own CD with copies of all important financial documents.Be sure to keep the CD in a safe-depositbox or other secured location not in your home. You can also get a booklet from yourinsurance company where you can record all account numbers and policynumbers and household inventory and other relevant financialinformation. Give it to someone you trust for safe keeping.Bankrate.comis the Web's leading aggregator of information on financial productsincluding mortgages, credit cards, new and used automobile loans, moneymarket accounts, certificates of deposit, checking and ATM fees, homeequity loans and online banking fees. Visit Bankrate.comto get the tools and information that can help you make the bestfinancial decisions.
Source: Money & Work
