Hurricanes, wildfires, earthquakes: These are the stuff of nightmares and also of headlines in recent weeks.
For those of us who are lucky enough to be watching the damage on TV instead of dealing with the aftermath, you may be wondering: How should I be managing the financial risk of a potential natural disaster?
I spoke with Alec Gorynski, the vice president of community development and corporate philanthropy at the First National Bank of Omaha, to help answer some common questions.
For people who are worried about protecting their assets from the risks of a natural disaster, here are the top things to pay attention to.
Insurance: “Review your homeowner’s insurance policy” Gorynski said. “When you do so, pay very close attention to detail. Few homeowners could say off the top of their heads what their policy covers.”
Consider flood coverage: In 2010, 39 percent of the nation’s population lived in counties on the shoreline, a number that’s growing. However, the Insurance Information Institute says only 12 percent of American homeowners have a flood insurance policy. Federal law requires it only in areas designated officially as high risk. But that risk map may be overdue for an update as “clear sky” floods and “king tides” become more common in areas like Charleston, S.C., Wilmington, N.C., and Miami.
You also may be worried about your car, especially if you need it to get to work. Comprehensive coverage tends to include flood damage, as well as fire, wind and hail. Do you have it?
Receipts: Save receipts for major purchases. It will help when filing a claim. “If your property is damaged, the more proof of ownership you have, the better, especially for items your homeowner’s insurance may not cover,” Gorynski said.
Savings: A rainy day fund isn’t just to protect you in the event of a job loss; you may need it if the rain puts your house underwater. Six months of expenses is the common rule of thumb.
Records: Besides saving receipts, you should keep important documents in a safe place with backups at a second location. This includes Social Security cards, passports, deeds and titles to your house and car, and insurance policies. You may want to scan these important documents and keep a virtual copy. Store it either locally, on your computer or a portable USB drive, or in the cloud on a service with security protections. CertainSafe is one product rated favorably by PC Magazine.
While you’re at it: Make a list of all your bank account information and passwords and make sure it’s saved in a secure place, on paper, in case you lose power.
Cash: Speaking of paper, think about banknotes.
“Natural disasters often take out power from entire communities. Due to this, ATMs are often out of service and stores might not be able to provide cash or change after a disaster,” Gorynski said. If there’s big weather in the news, “visit an ATM in advance of the natural disaster and make sure to have cash in small bills on hand.”
Know your rights when the worst happens: “If your home is in a designated disaster area, your bank may waive fees and adjust your payment schedule to help you get back on track,” Gorynski said. But you should contact your lender directly because scammers swoop in to try to mislead people about this.
Besides repairs to your home, insurance may also cover temporary housing and rental cars. The Insurance Information Institute recommends that you document the damage immediately with photos. But don’t hold off on making repairs while you wait to get a claim paid, especially when those repairs could protect against further damage (such as fixing a roof leak or cleaning to prevent mold).
Finally, if you are in danger of missing debt payments because of a disaster, contact your creditors to try to work out a payment plan. Get in touch with them before they come looking for you.
Anya Kamenetz’ most recent book is “The Test: Why Our Schools Are Obsessed with Standardized Testing, but You Don’t Have to Be.” She welcomes your questions at firstname.lastname@example.org.