5 Tips to Safeguard Your Financial Life
Most know it’s very important to prepare for a natural disaster. But fewer realize that in addition to stockpiling flashlights, bottled water and emergency medical supplies, they also need to be financially prepared. The following tips can help.
#1 – Build an emergency fund.
It’s wise to maintain at least three to six months’ worth of living expenses in a liquid account that’s easily accessible. In an emergency, this money can help cover short-term expenses until you’re able to access insurance payouts and other less-liquid funds.
#2 – Safeguard critical documents.
In an emergency situation, you may need to leave your home quickly. Your priority will probably be to ensure your loved ones and sentimental possessions make it out of the house safely, and you may not have time to track down all important personal and financial documents. That’s why it’s wise to make a plan for how to access the information and documents you’ll need.
Start by collecting, copying and storing the following records:
- Driver’s licenses
- Birth certificates
- Passports
- Social Security cards
- Marriage and divorce papers
- Home deeds and titles
- Vehicle registrations and titles
- A room-by-room inventory of your possessions
Keep these documents in a bank safety deposit box or a waterproof, fireproof storage box that’s easy to access in a hurry. It’s also wise to save copies of these documents at a different location, such as in cloud storage, on an external hard drive or with a relative or friend.
It’s also important to make sure you’re able to access all your financial records in an emergency, including:
- Investment accounts
- Payroll files, such as pay stubs and employer benefits records
- Insurance policies
- Estate planning documents
- Income tax information
#3 – Keep some cash on hand.
In a natural disaster, you may not be able to access your bank or an ATM. It’s wise to keep some cash on hand to pay for necessary expenses, such as food, lodging, gas, etc. until you’re able to access your accounts.
#4 – Review your insurance policies.
Take time to review your insurance policies to make sure you have adequate coverage in place. Consider the following:
- Homeowners insurance – It’s important to note there are two types of homeowners policies: those that cover the cost to rebuild or replace your home, known as the replacement cost, and those that only cover the current value of your home, known as actual cash value. Be sure the type of policy you have continues to meet your needs. Also, be aware of any limits or gaps in your homeowners coverage that you may need to fill.
- Renters insurance – If you rent your property, you’ll want to make sure you have adequate renters insurance coverage to cover the cost of replacing your personal possessions.
- Flood insurance – Most standard homeowners and renters insurance policies don’t cover damage from floods. If you live in a flood-prone area, you may need to add flood insurance to your existing coverage. Use FEMA’s flood zones map to find out if you live in a high-risk area.
- Comprehensive coverage – Comprehensive coverage for vehicles can help pay for losses caused by flooding and other natural disasters. This is in addition to the liability coverage most car owners must carry.
#5 – Don’t fall for scammers.
Unfortunately, scammers often use natural disasters as a way to target distressed victims. Be wary of any contractors selling repairs door-to-door, especially if they promise a discount for upfront payment. Remember that no government aid program or benefits department will charge you an upfront fee to receive a service or benefit. And keep in mind that insurance agents will never sell you a policy to cover damages after a natural disaster occurs. If someone offers you insurance to help pay for your damages, it’s likely a scam.
