The recent devastating storms that left millions in the mid-Atlantic states without power and the Colorado wildfires that have forced thousands from their homes are a reminder that it pays to be prepared for disasters of all kinds. Here are several steps you should take to make sure you and your finances can withstand an emergency.
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Fund your emergency fund. Set aside enough cash to cover several months of expenses' and pay for any insurance gaps or deductibles. If a natural disaster strikes -- or if you lose a job or face any other challenges -- this fund will tide you over until you can get back on your feet. See 7 Strategies to Build an Emergency Fund for tips on finding enough spare cash in your budget to set aside for a rainy day. Avoid locking the money up in certificates of deposit or stocks. Your emergency money should be there when you need it. So where to put it? Here are 10 low-risk ways to earn interest on your savings.
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Check your homeowners and renters insurance. Although standard homeowners insurance will protect you if a major storm hits, it will not provide flood or earthquake protection. Homeowners and renters can buy added coverage for these disasters. Also make sure you have an inventory of your possessions to make the claims process easier. For more information, see What Disasters Does Your Homeowners Policy Cover? and Protect Your Home and Finances From Storms.
Buy life insurance. Generally, you should consider enough life insurance to replace your income -- short-term and long-term -- if you die. See How Much Life Insurance Do You Need? for help figuring out how much coverage to get and 4 Ways to Save Money on Life Insurance for keeping the cost of coverage under control.
Gather important documents. A will provides the ultimate insurance, by outlining how your finances will be handled after your death (see Six Steps to a Good Will). You also should have a living will to explain your wishes about life-sustaining medical care if you become terminally ill and are unable to speak for yourself. Other documents you might need to claim benefits and ensure your financial security include:
-- Birth certificates
-- Citizenship and adoption papers
-- Marriage license and divorce papers
-- Social Security card
-- Insurance policies (You must have the original life insurance policy to claim benefits.)
-- Medical records and information
-- Deeds to property, automobile titles, mortgage papers, leases
-- Military records
-- Investment records
Keep the documents listed above in a fire-resistant home safe or lock box. However, do not keep wills in a safe deposit box. It can be difficult for family members to gain access and might require court supervision to open. Keep a copy in your home safe or at your attorney's office. The original usually is kept with the county registrar of wills.
Compile account numbers and contact information for creditors, service providers and anyone from whom you receive a bill. According to the nonprofit consumer organization GreenPath Debt Solutions, you should let creditors know about your situation when a disaster strikes and provide updated contact information. Ask them to waive late fees if you received any as a result of a disaster that left you unable to pay bills on time. And if you're unable to pay any bills, ask your creditor if you can defer payments under a hardship clause. Most will allow you to do so for a month or two under emergency circumstances, according to GreenPath.
Create a portable survival kit. There may come a time when you have to leave your home quickly. Creating a portable survival kit with food, water and supplies to last at least three days will help hold you over until your situation stabilizes or help arrives. You can pack your own, or you can buy a pre-made kit at the American Red Cross Store for $80. See 7 Must-Haves for Your Emergency Kit for items that will help you get by when the power is out.
Stock up. FEMA recommends that you keep enough food and water in your home to sustain your family at least two weeks. Buy canned goods, dry mixes and other foods that store well. (Don't forget a manual can opener and a camping stove, in case you lose electricity.) To build your stash, purchase a few extra items each time you go to the store, or buy a little more when favorites go on sale.
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