We’ve learned the hard way that natural disasters come in many different forms and can strike at any time. Whether it's a hurricane, flood, tornado or pandemic, the physical and economic damage can be devastating.
In Southwest Louisiana, we’ve been through natural disasters and have learned the importance of being prepared. Every year when hurricane season begins, a great deal of public attention is directed toward disaster preparedness — keeping extra food, water, and emergency supplies on hand; securing your property; and having an evacuation plan in place. But have you also taken steps to survive financially in the event the unexpected occurs?
“During the evacuation for Hurricane Rita in 2005, many people found themselves unprepared for the financial demands that follow in the days, weeks and months after the storm passed,” says Bobby Broussard, Senior Vice President with Lakeside Bank. “From simple things like having enough cash on hand to more complicated issues such as accessing financial accounts and filing insurance claims, dealing with money-related issues after a natural disaster is not something anyone spends a lot of time thinking about — until the need arises. It’s important to plan ahead and put your finances on your preparedness checklist every year.”
More recently, the COVID-19 pandemic and the stay-at-home order led to the temporary closure of many businesses, resulting in loss of income for an extended period of time. Government stimulus programs provided some relief, but for many people, this shutdown created tremendous financial strain. “This is not a situation any of us have ever experienced, so having a plan in place for a pandemic wasn’t part of any financial planning for individuals or businesses,” says Broussard. “But it has definitely shone a light on the importance of having contingency funds available when any type of disaster strikes.”
Broussard recommends giving some attention to the following finance-related items when organizing your personal disaster plan:
Keep Some Petty Cash on Hand for Emergencies
Depending on the nature of the disaster, ATMs might be out of commission for quite some time. You don't want to keep too much cash on hand, but keeping enough to get by on for a short time is a good idea. It’s also important to consider what you will do if you have to go without a paycheck for a while if your employer is affected by the disaster or how you will cope if your direct deposit paycheck is delayed because of disaster-related electrical or automated system problems. If you can't get back to work for an extended period, having an emergency fund in your bank accounts can help. A standby home equity line of credit you can tap into an emergency is also worth considering for use in emergencies, says Broussard.
Bring a List of Your Accounts
If you have to evacuate, make sure you have a list of your checking, savings and credit card account numbers with you, along with the phone number of the financial institution, in case you need to make arrangements by phone to access your money.
Keep Important Documents Easily Accessible
When disaster strikes, you won't have time to search for things like insurance policies, birth certificates, passports, wills, trust documents, records of home mortgage and improvements, and any other pertinent documents. It's a good idea to keep originals in a safe deposit box, but you should also keep copies together at home in a fireproof, waterproof evacuation box or pouch you can find and grab quickly. If you're tech-savvy, consider scanning your important documents into a computer file you can store online and/or on a jump drive. You can put any personal computer files on this as well. Again, a copy of this electronic storage device should be kept in a safe place out of your home.
Have the Right Kind of Insurance Coverage
Annually review your homeowner’s or renter’s policy to see what’s covered and what isn’t. Talk to your agent about flood insurance. Review your coverage amounts to be sure you’re keeping up with inflation. Also, make sure you’re comfortable with the deductibles. Broussard says if you can pay those out of pocket, higher deductibles can result in significant premium savings. You may also be able to lower some premiums by taking steps ahead of time to protect your property from loss, such as anchoring your foundation and/or roof, installing smoke alarms and fire extinguishers, clearing brush and trees away from the house, installing storm shutters and so on.
Inventory Your Household Possessions
Use a video camera if you have one. Otherwise, take digital photos for each item of value, including clothes, jewelry, furniture, electronics, appliances, fixtures, etc. Include a description of each and save these, along with any professional appraisals and estimates of replacement values in a safe place away from your home. Make it a point to update regularly.
Have a Rainy-Day Fund for Emergency Situations
Repairs after a storm or flooding disaster can be extremely costly, as can financial needs when you experience a job furlough. Broussard says even with insurance, most hurricane deductibles can be as much as 5%, which could be thousands of dollars you’ll need to have available to get home repairs started. “This is that ‘rainy day fund’ you hear about. It should be a real thing, and you should have a plan in place to regularly contribute to your emergency fund — and resist the urge to dip into it except for real emergencies.” Broussard says a good rule of thumb is to have at least six months of regular expenses saved.
“As we’ve experienced, disaster can come when you least expect it,” says Broussard. “Taking the steps to be financially prepared will put you in a more secure position to cope with the damage and uncertainty a disaster may bring.”
