You and Your Insurance Policy- Thunder Buddies for Life

The weather’s been a little crazy here in the Northeast lately.  We’ve had so many drenching rainstorms that I’ve even thought about buying a pair of rain boots (sorry Mom, that was a fleeting thought), and I hate boots.  After having lost power for four days during Hurricane Irene, every time the lights flicker now I wonder how long it will be and immediately regret not keeping up that emergency kit I vowed to stock as we sat a year ago in our house lit up with solar yard lights.

While preparing as best we can for the physical damage potentially coming our way, sometimes we forget about financial preparations as we rush out for milk and bread like it’s our last chance for milk sandwiches (why do we do that??).  So as you review your emergency plans and buy fresh batteries, add a financial disaster plan as well.

First, some general preparations we all should take, no matter how blue the sky:  ideally, we should have 10% of our annual income in a safe emergency account we can access immediately, and another 20% of our annual income or 20% of our outstanding mortgage balance, whichever is greater, in additional reserve.  This should also be in interest earning vehicles rather than exposed to the stock market, but perhaps in certificates of deposit or longer term interest earning investments.  Online savings accounts are useful for emergency funds, as the money is safe but out of sight, out of mind.  Those amounts may seem insurmountable, but don’t be discouraged.  Start small and be faithful.  In a world where things seem so out of our control, working on a goal like this can go a long way toward the peace of mind that comes from doing something to improve the situation.  Track your spending so you know where you stand; take a good look to see if you can easily cut some things out of the budget now and stash the cash you save.  Note where you could cut deeper if need be.  If you don’t already have one, open a home equity or other line of credit, for an extra safety net should you experience a financial catastrophe.

Review your homeowner’s or renter’s insurance policy to familiarize yourself with your coverage and deductible.  Save up the amount of your deductible and stash it away with your emergency fund.  As many people find out the hard way, a standard homeowner’s policy does not cover sump pump failure or flood damage.  If you have a sump pump, inquire with your insurance company about the availability of a special endorsement or rider to cover failure or backup.  Even in historically dry areas, purchasing flood insurance is worth the reasonable cost.  Storms don’t read the flood maps.  Information on sample rates can be found at www.floodsmart.gov.

In the unfortunate event that you need to file a claim on your insurance, it is helpful to have a video or still inventory of your belongings.  In times of disaster, you may not have the presence of mind to recall what was in fact in your home.  You can also use the inventory to demonstrate the quality of items you owned, to get the proper replacement.  The inventory should be stored away from your home, ideally in your safe deposit box.

Check your policy for the rules on replacement coverage for your dwelling.  Is it up to you to keep up with insuring the cost of rebuilding by raising the amount of coverage, or does the insurance company assume that responsibility?  You don’t want to get caught short and find out after disaster strikes that your policy only covers up to 125% of your very outdated limit, which isn’t even close to what it costs to rebuild your home today.

While you’re reviewing your insurances, be sure you have enough life and disability insurance should the unthinkable happen.  If you don’t have a current will, get one now, especially if you have minor children.  Think through the end of life decisions for your medical directives; www.caringinfo.org can help you with your plan.

What if you need to evacuate?  Most moms know exactly where the family photo albums are and will be sure to grab them on the way out.  But just as important are your financial albums to keep your personal economies running under any conditions.  Purchase a fireproof box, and fill with documents and items you’ll need to take with you, in sealed plastic bags.  In the box, keep an up to date list of your safe deposit box contents and the key; names and phone numbers of your tax professional, financial advisor, attorney, and insurance agents; insurance policy numbers and contact information; copies of drivers licenses and social security cards; wills; and a list of all credit, savings, and investment accounts and passwords.  Create a bill paying “map,” outlining how and when each of your bills are paid, noting websites and automatic payment dates for electronic payments.  Include mailing addresses for electronic bills as well, in case you are unable to make your payment online.  A few stamps and envelopes are helpful too.  Let a trusted family member or friend know where to find the information in the event you are incapacitated.  Keep a “check out” system for the box (and your safe deposit box too).  I know from personal experience that sometimes a passport or social security card is removed and not returned promptly; the checkout system comes in handy to remind that family member (aka kid) that he or she was the one who had it last.

The “cloud” can come in handy here too.  A secure, online folder can be a good place to keep those lists, and access them virtually from any location with an internet connection.  Your medical directives and prior year tax returns are handy to store here as well.  Remember to back up your hard drive regularly and store off site, or use a secure online backup service.  One thing should not be stored only electronically, and that is cash.  We’ve gotten in the habit of using plastic over paper, but in the event of a true disaster, ATM’s and other electronic commerce may be down.  Keep a stash of cash in your locked box for this kind of emergency.

Let’s hope we won’t need these emergency plans any time soon.  But with a well-stocked disaster kit and financial preparations in place, we can sit back and watch while others are scrambling to find a store that isn’t out of D batteries when the next storm comes.  Now if you’ll excuse me, I have a hand crank cell phone charger to buy.

photos by: rieh & Davidpd

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