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How to create a financial emergency plan for natural disasters

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It seems like you can't check the news these days without hearing about a natural catastrophe occurring somewhere in the country. Our nation's diverse landscape presents a wide range of challenges—from wildfires in the western U.S. to tornadoes across the Midwest to hurricanes on the East Coast.

Natural disasters can happen anywhere with little notice, and the outcomes are largely out of our hands. The one thing we can control? Having a financial emergency plan in place to protect ourselves and our families.

Keep reading to learn how to prepare for a natural disaster to keep your financial house as safe as possible.

What to include in your financial emergency plan

When a natural disaster strikes, you may be uprooted from your home. If that happens, it's ideal to have the ability to leave quickly and safely while having everything you need close at hand. Having a strong emergency plan in place involves keeping key financial necessities at the ready. This includes identifying information and other important documents that can make navigating a logistically and financially challenging time easier.

Consider keeping these items in an easily accessible and safe place in your home so you can grab everything at once if you're in a rush.

  • Identification. Original birth certificates, Social Security cards and passports for all family members.
  • Cash in small bills. Enough to buy gas, groceries, toiletries, etc. for at least a week.
  • Extra credit card. As a backup in case you're separated from your wallet.
  • Inventory. A list of valuable items in your home that may qualify for insurance reimbursement.
  • Insurance paperwork. Homeowner/renter insurance, life insurance, health insurance, etc.
  • Income records. Documents that can verify your employment status.
  • Financial documentation and contact information. A list of your accounts and ways to reach your banking institutions, service providers, insurance agents, etc. (Consider storing this information in a safe or on a protected flash drive.)

Keep these resources in a sturdy envelope or waterproof container. Alternatively, you could use a portable drive or cloud storage to house digital versions of your financial documents. That way, you don't even have to think about carrying too much.

Why an inventory is essential (and 3 tips for creating one)

One of the items on that list of must-haves might seem puzzling, but a home inventory is one of the most important elements of a financial emergency plan. Tallying up your valuables will be handy if a natural disaster damages or destroys your home and belongings. Amid the stress of losing your stuff, you may not be able to remember everything accurately or know offhand what your things were worth.

By presenting your insurance company with an organized and thorough home inventory, you can quickly get on the path to restoring your belongings.

Assembling an inventory will take time. One approach is to put in an hour each weekend until you finish. That way, you don't feel rushed and you won't miss any details. It also can help to go room by room until you're done. Here are a few more tips to help you as you chip away at this important process:

1. Highlight your key belongings

You'll want to make sure these belongings have a spot in your home inventory:

  • Electronics. In this digital world, you likely have multiple (expensive) digital devices—computers, phones, TVs, sound systems and all their respective accessories. When you add it up, the all-at-once replacement costs can be staggering.
  • Appliances. Similarly, your refrigerator, stove, washing machine and any other major home appliances should make the list if you own them. Save the receipts and serial numbers for these big-ticket items.
  • Furniture. You may remember to note big items like your living room couch, but don't forget about the accessories and other furnishings. Rugs and window coverings, for example, can be major expenses.
  • Hobby equipment. Musical instruments, tools, art supplies and other hobby necessities can add up. While a single bottle of paint only may cost $15, if you had 50 of them to replace at once, it would be expensive.
  • Jewelry and clothing. In addition to any big-ticket items, be sure to include any less expensive but still pricey items. For example, having to buy all new winter coats and snow boots for a family of four could quickly add up.

2. Go digital with your receipts

The inventory process can be overwhelming, especially if you're trying to do it all at once with pen and paper. Consider scanning any receipts for proof of large purchases and adding them to the flash drive or cloud storage where you keep your financial emergency kit. While it may be too late for some of your long-owned items, make it a habit going forward to digitize and add receipts to your list at the time of purchase.

3. Describe items well and take photos

When creating your inventory, you may want to go beyond just listing the item by name. Instead of writing "pearl bracelet," you might detail that it's a "pearl bracelet with 14k gold clasp purchased for $2,000 at Tiffany & Co. on December 15, 2020." Consider capturing digital pictures, too—it takes some pressure off you describing everything. If you have important details about an item, such as a serial number, add those to your notes or photos as well. All these things can make filing an insurance claim a whole lot easier.

4. Categorize your belongings

That said, for less-important, less-expensive purchases—such as an assortment of scarves and gloves or your collection of kitchen utensils—you don't need a detailed report for every single item. You can account for them broadly. For example, you might put "eight pairs of children's shoes" on your inventory.

5. Update your inventory regularly

You'll probably find that it's easier to update your home inventory as you go rather than having an "inventory day" once a year. Make it a part of your monthly routine to give your inventory a refresh.

Once you've built your home inventory, make sure you have enough coverage through your homeowners or renters insurance to replace everything. If not, work with your insurance agent to make sure you're doing what you can to protect your belongings.

What to know about your homeowners insurance policy

Speaking of insurance coverage, it's wise to check your homeowners policy for what kinds of natural disaster coverage you have. That way, you know if you're fully covered for the events that are most common in your area. Here are a few ways you can ensure you have the level of coverage you desire:

  • Review your current policy. For which natural disasters does your current policy cover you? Some, such as fires, are commonly covered while others, such as floods or earthquakes, probably aren't.
  • Consider a separate policy. For any events your main policy doesn't cover, you might have the option to buy separate coverage—in fact, you might have to. For example, if you live in a flood-prone area, your mortgage lender may require you to have flood insurance even if your main policy doesn't cover it.
  • Update your coverage from time to time. It's possible that your income has changed over the years, you've made upgrades to your home or you've bought more expensive belongings. Make sure you review your homeowners policy to ensure you still have the appropriate amount of coverage based on any lifestyle changes.

When you need help, turn to a financial advisor

Natural disasters can cause a lot of unexpected damage, inconvenience and concern. One way to help make the entire situation more manageable is to have a strong plan in place for safeguarding your financial details.

A financial advisor can help you create a financial emergency plan to make sure you're prepared if the worst were to happen. They also can help you review your current insurance policies.

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