Natural disasters are inevitable, unpreventable and often come without warning. No part of the world seems to be spared, whether it's a hurricane, earthquake, tornado, drought or flood. Even though such catastrophes can't always be predicted, their likely aftermaths often can, including property loss, power or water service disruption, scarcity of food and supplies or overtaxed relief organizations.
Superstorm Sandy was a powerful reminder of why it's vital for your family to develop a disaster plan. By planning ahead and knowing what you might need under dire circumstances, you can save yourselves a lot of time, money and grief.
The Federal Emergency Management Agency (FEMA) offers great suggestions for developing a family emergency plan, building an emergency supply kit, and learning what to do before, during and after emergencies (everything from home fires to terrorist attacks). They even provide an emergency plan for family pets.
Once your physical safety has been assured, you'll inevitably need to access important financial and legal records, whether to file insurance claims, apply for loans or simply draw cash from your accounts. Taking these few steps now will make accessing such information much easier when the time comes:
Create a log of all account numbers, toll-free emergency numbers, contact information and passwords for your bank and credit card accounts, loans, insurance policies, utilities and other important accounts. Update it regularly and save copies in secure, offsite locations such as a safety deposit box or with a trusted friend living in another area. You can also email the list to yourself in an encrypted, password-protected file, save it on a CD or USB drive, or use a cloud-based storage service like Dropbox that will let you access it from any Internet connection.
Make PDF copies of tax returns, insurance policies and legal documents (wills, powers of attorney, etc.) and save offsite in the same manner as above, in case your files or computer are destroyed by fire or flood. Also make digital copies of invaluable family photos, documents and memorabilia that money can't replace.Document your possessions. If you should ever need to file an insurance claim or claim a tax deduction for lost, stolen or damaged property, it'll be much easier if you have an inventory of everything you own -- photos or videotape are even better. A few available tools:
- The IRS' Casualty, Theft and Loss Workbook includes a worksheet for cataloging and estimating the value of your possessions.
- The Insurance Information Institute maintains a free, secure online home inventory software application (including a smartphone app) that lets you access your home inventory, anywhere, anytime.
- Your insurance company's website likely contains a downloadable inventory form.
If disaster does strike and you need tax relief, speak to a trained IRS specialist at 866-562-5227. To learn more about many other resources available, visit the IRS' Disaster Assistance and Emergency Relief site.
Make sure you fully understand your insurance policies. Many people learn the hard way that standard homeowners insurance doesn't cover flood damage associated with hurricanes, tropical storms and many other weather conditions -- even backed-up sewer drains. You can purchase separate coverage from the National Flood Insurance Program, although be aware that there's a 30-day waiting period.A few other insurance reminders:
- Most policies cover wind damage from windstorms and tornados, but may require specific, additional coverage if the damage is caused by a hurricane.
- Earthquake coverage opportunities and rules vary by state, so check with your state's insurance commissioner.
- Many homeowner policies exclude coverage for mold damage except under specific circumstances -- for example, if mold was caused by a burst pipe it probably is covered, but if the damage was due to repeated water leaks or poor home maintenance, probably not. Review your policy carefully and ask about purchasing a separate rider for mold coverage.
- If your car is damaged by a flood or struck by a tree falling in a windstorm, it would likely be covered under the "comprehensive" portion of your car insurance. However, if a tree falls in your yard and doesn't hit the house, its removal wouldn't be covered by your homeowner's policy.
- Store a supply of emergency cash in a secure location in case banks and ATMs are inaccessible.
- Store emergency contact numbers (including fraud lines for bank and credit card accounts) in your cellphone, in case you're away from home. Needless to say, you should always keep your cellphone locked and password protected, in case of theft.
- Document any damage with photos or video before you start cleanup or repairs.
- Keep track of expenses you incur to prevent further damage, for temporary housing or to move your possessions for safekeeping, as they may be reimbursable under your insurance claim.
- Don't delay submitting your claim, since insurers often settle claims in the order filed.
FEMA provides information on how you might be able to get government assistance before, during and after a disaster. You can apply for assistance online at Disasterassistance.gov or by calling 800-621-3362.
Bottom line: Develop a family emergency plan now and make sure everyone knows what to do when disaster strikes.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
To participate in a free, online Financial Literacy and Education Summit on April 17, 2013, go to Practical Money Skills for Life.