Financial Preparations for a Natural Disaster

As residents of areas affected by Hurricane Sandy found out, a natural disaster can bring out not only emotional hardship, but financial hardship as well. From keeping important documents safe and accessible to having enough cash on hand to get by until things return to normal, being prepared for a disaster is an important part of protecting your home and your family. It could be a natural disaster like a hurricane, tornado, flood, fire, mudslide, or earthquake. Or it could be something on a more limited scale like a power outage. Whatever the crisis, taking the steps below will help you better handle whatever might come your way.

Get organized before a disaster strikes:  Chances are that’s not at the top of your to-do list for the weekend, so it’s very easy to procrastinate. But think of it this way: you buy insurance to protect you from catastrophes; disaster preparedness is just another kind of insurance that you prepare yourself. It does not have to cost a lot, but it could really save time and added frustration should something happen to you. Once you’ve got a plan, you only need to update it periodically.

Keep important papers and documents safe and easily accessible: You might need to gather your most important papers in a hurry. Do you know where they are? Can you grab them quickly and leave the house immediately if you need to? Here are some of the documents to which you may need access:

  • IDs (driver’s license, Social Security card, passport, birth certificate)
  • Financial documents (checkbooks, investment account numbers, passwords, phone numbers, retirement account information, estate documents, insurance policies)
  • Medical records

Most importantly, you’ll need cash (at least enough to cover one or two weeks’ emergency expenses).

You might also want to have a list of key contacts/phone numbers, which may include family cell-phone numbers and e-mail addresses, police, fire, and ambulance numbers, Red Cross and emergency response central local numbers, as well as your company’s human resources department number.

Keep all these important papers in a plastic bag in your home safe, or in any safe place where you can grab them quickly if you need to leave your home in a hurry. Also, it may be a good idea to leave copies of everything with your attorney and/or financial advisor, in case the original documents get lost or damaged.

Prepare for a medical emergency:  What if you or a family member suffers an injury (or worse) when disaster strikes? Check your health-insurance coverage to determine out-of-pocket costs in case surgery or emergency treatment is needed, and try to set aside enough money to cover these costs. Designate a family member or close friend as your primary contact, and prepare a living will and power of attorney for health care (documents that specify your wishes in case you are incapacitated).

Create an emergency fund:  Most experts recommend setting aside enough money to cover about six months of living expenses. But it is equally important that this money be easily accessible. It may be a good idea to keep about half in cash, ready to use, and the other half in liquid investments that you can cash out easily.

What to do if disaster strikes:  If your house has been damaged, you may need emergency shelter. The Red Cross or your local emergency response center should be able to help. Your property insurance agent can help you file a claim on your homeowners or other types of insurance policies. If your area has been declared a federal disaster area, you may qualify for financial relief. If you have been injured, you might need to file for disability benefits. If you are healthy but a family member needs your care, you may be able to take as many as 12 weeks of unpaid leave under the Family and Medical Leave Act without losing your job.