Protect Your Financial House in 3 Steps

Devastating hurricanes, tornadoes, earthquakes, floods, hailstorms, wildfires and even volcanoes have wreaked havoc across the U.S. this past year. Yet many Americans still haven’t taken the critical steps necessary to protect their financial lives from such disasters.

Coping with a disaster is traumatic on many fronts, and the recovery can be lengthy and very stressful. Your financial resources and the ability to utilize them on short notice may become more important than ever as you build back your family’s life. The Massachusetts Society of CPAs encourage people to set aside a few hours this week to ensure they’re prepared in the event disaster strikes:

1. Review Your Insurance

The right insurance coverage can help you prevent a natural disaster from turning into a financial disaster for your family, providing funds when you need help the most to repair, rebuild, replace and put your life back together. Since your insurance won’t automatically keep up with changes in your personal property, it’s up to you to work with your insurance agent to make sure your coverage meets your current needs before disaster strikes.

Your homeowner’s or renter’s policy may not have kept up with changes in value, especially if you purchased coverage years ago and prices have increased in your area or you’ve made significant improvements. Take a look at the values in your policy - usually specified in a “declarations page” before the fine print - and consider how the coverage stacks up against what it would cost to repair or rebuild your home today.

If you’ve added valuable items over the years, make sure they’re covered. Many standard homeowner’s or renters’ policies have relatively low limits on coverage for items like jewelry and watches unless they’re listed on the policy along with their values in a special rider.

Make sure you’re covered for all the risks you face, especially if you’re in an area where flooding may occur. Many standard homeowner’s policies exclude coverage for certain risks such as floods, requiring you to purchase separate coverage. It’s important to know what is and is not covered up front, otherwise you’ll be in for an unpleasant surprise. Your agent can help you understand any excluded risks and help you decide if you need more coverage.

2. Secure Important Documents

Delays in locating, or the inability to locate, some of your key financial documents can throw major roadblocks along an already difficult path to recovery. There are some documents you will need right away after a disaster strikes and others that you may not need right away but will be very difficult to replace if they are lost or destroyed.

Original documents should be kept in a safe deposit box or a home safe that is capable of withstanding fire and water damage. If you use a safe deposit box, consider a bank that is not in the immediate area of your house since a disaster can impact the entire area. It is also a good idea to keep copies of all original documents at a secure off-site place such as a close relative’s home.

A password protected online “Cloud” storage account is a great back-up option to secure important financial documents. To get documents copied into the cloud, you can simply scan them or even use your phone.

The key financial documents for each family depend on its particular situation. In general, it is a good idea to secure the following:

• Identification records including your driver’s license, birth certificate, marriage certificate, passport and social security card;
• Property deeds, mortgage papers, lease documents, car titles and registrations;
• Insurance policy information;
• Recent bank, investment and retirement account statements; and
• Will and trust documents, and power of attorney if applicable. 

3. Do A Home Inventory

If your property is destroyed, you will need to be able to establish what you’ve lost for insurance claim purposes. With nearly everyone having a phone with a camera, it’s easier than ever to put together a photo inventory of what you have. This can be as simple as walking around your home, inside and out, recording your stuff with your smartphone’s video camera and storing that video in the cloud. Or you can take the time to photograph and itemize each of your possessions.

Want more help?

For more information, check out, “Disasters and Financial Planning, A Guide for Preparedness and Recovery.” This guide is a joint effort of the American Institute of CPAs, the Red Cross, and the National Endowment for Financial Education that has been developed to help Americans make informed, thoughtful decisions about their family’s present and future financial activities.