Weston: strengthen your finances against natural disasters

Emergency preparedness experts recommend that you have a go bag and a stay bin for disasters: kits with supplies to help you survive a few days if you have to evacuate your home or shelter in place.

Preparing your finances for natural disasters is also smart. Having cash on hand, access to credit, and good insurance coverage can get you through difficult times. Fortifying your home against disasters can also be a good investment.

Not everyone can make these preparations, of course. The poorest people often bear the brunt of disasters. But anything you can do to make your situation better now could help limit the toll.

KEEP MONEY

Having cash on hand can help pay for groceries, gas, shelter, and other necessities if ATMs and payment systems aren’t working, which can happen if the power goes out. or if cyber attacks take systems offline.

You may need more than you think, especially if you will be away from home for more than a few days. Consumer insurance lawyer Amy Bach recommends keeping at least $ 2,000 in a safe place somewhere in your home. After a widespread disaster, there is often “incredible competition” for rentals and other accommodation, and a cash deposit could help you find a place to stay, says Bach, executive director of the nonprofit United Policyholders.

Currency should be in addition to any emergency savings you have in the bank. Again, anything is better than nothing. While financial planners generally recommend an emergency fund equal to three to six months of spending, even a few hundred dollars can help you cope.

GET A CREDIT

Your insurance may have high deductibles or other limitations on your coverage that require you to pay thousands or even tens of thousands of dollars out of pocket. Earthquake and hurricane policies, for example, often have deductibles of 10% or more of the insured value. Insurers can also limit the amount they pay for upgrades needed to meet current building codes or to replace older roofs, Bach says.

A home equity line of credit can give you access to a relatively inexpensive source of money in an emergency. You’ll need to put this in place long before disaster strikes, as lenders won’t let you borrow on a damaged home. Resist the urge to use this credit for other purposes, so that the money is available when you need it.

An alternative if you are a tenant or cannot qualify for a HELOC is to ask your bank for a personal line of credit. Credit cards can also help pay bills if there is enough credit available. Once you have around $ 500 set aside for emergencies, consider paying off your credit cards and trying to use no more than 30% of your credit limits. Using even less of your credit limits would be even better, as it frees up more space on your cards and also helps build or maintain your credit scores.

TRY TO COVER THE BIG RISKS

Check your home’s susceptibility to various disasters on freehomerisk.com, a database created by HazardHub, which provides risk data to insurance companies. Each hazard your property might face is rated from A to F. The lower the rating, the more you should consider ways to mitigate the risk if you can, says HazardHub co-founder Bob Frady.

This could mean buying additional coverage. A typical homeowners ‘or tenants’ policy does not cover damage caused by flooding or earthquakes, for example, but such coverage can be purchased separately.

Review your policy to see what is covered and what is not. Make sure you have replacement coverage for your belongings rather than actual cash value coverage, which pays considerably less. You’ll also want at least 24 months of loss-of-use coverage, which pays for your living expenses while your home is rebuilt, Bach says. Widespread disasters can lead to even longer reconstruction times.

For example, “It usually takes at least two years to rebuild after a forest fire,” she says.

PROTECT YOUR PROPERTY IF YOU CAN

There is no way to make your home completely disaster proof, but there are ways to “harden” it to reduce potential loss, says Frady.

Frady helped start HazardHub after a friend’s house suffered significant uninsured damage when a nearby river overflowed its banks. The friend didn’t realize she lived next to a flood-prone area because her mortgage lender didn’t require her to purchase flood insurance, Frady says.

If she had known, she could have purchased the insurance and taken steps to protect her belongings, such as regularly changing the batteries in her sump pump, which was failing, and keeping valuables out of the basement. or other low points in the house.

Installing storm shutters can reduce losses from hurricanes and tornadoes, while bolting your home to its foundation can help it survive an earthquake.

“It’s important to know what the dangers are, and that can lead you to create a safer place,” says Frady.


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