As I write this, the Carolinas are experiencing the worst of Hurricane Florence. I’ve ridden out half a dozen hurricanes as a native Floridian. As a CERTIFIED FINANCIAL PLANNER™ professional, I’ve seen the difference that having (or not having!) a hurricane financial preparedness plan can make. The aftermath of a hurricane is not only about the damage to life and property, but for many it can take a serious personal financial toll. As you stock up on canned food, batteries, and bottled water, don’t neglect to address these top 6 financial priorities before a storm makes landfall.
1. Review your homeowners insurance policy for hurricane financial preparedness
Odds are your home is your most valuable asset. Why roll the dice on this? Not having homeowners insurance coverage is a mistake. Having a homeowners policy with little hurricane windstorm coverage could become a catastrophe. Typically, you’ll have a windstorm deductible for hurricane damage claims in addition to your All Other Perils deductible for most other claims. The deductible for hurricane damage can exceed 10% of home value in some cases, so be sure to review your policy. To be clear, only one of the two deductible apply when there is property damage – they don’t add up. The cause of the damage will determine which deductible applies.
If you are underinsured, which is often the case as your home value rises over the years, review your coverage with an experienced property and casualty insurance broker. Note: While you’re at it, speak with the insurance broker about flood insurance if you’re in a flood zone. Flood insurance is a standalone policy and is not included on your homeowners coverage.
2. Invest in quality hurricane shutters or hurricane impact windows
Injuries and death often occur before and after a hurricane, especially when securing the exterior of your home and during aftermath cleanup. Getting plywood up and down from windows and doors can be dangerous, and usually involves ladders, drills, power saws, hammers, and nails. This is a recipe for bodily injury and an expensive trip to the emergency room.
Investing in rollup shutters or hurricane impact windows and doors will not only keep you safe from a hurricane, but will also keep you safe from yourself! In addition to peace of mind, owning quality hurricane shutters or installing impact windows and doors reduces your homeowners insurance premium in some states. In Florida, available discounts range up to 42% of the hurricane windstorm portion of your insurance premium! A little investment now saves you money in the long run.
3. Find a reputable and experienced public insurance adjuster, and add his or her number to speed dial
After a hurricane damages your home, having appropriate homeowners and windstorm coverage often isn’t enough. You’ll be one of thousands of homeowners seeking similar insurance payouts for home and property damage at the exact same time. Internet and cell phone service will likely be down in the days after a storm. Filing an insurance claim will be a challenge to say the least. Even when you successfully file your claim, the insurance company may underpay. Do you have the knowledge and experience to effectively obtain the full amount of cash to make you whole?
A public insurance adjuster’s service is to get you the highest payout possible from the insurance company for your claim. He or she may get you thousands of dollars more than you would have received on your own.
Additionally, go as far as to call the adjuster a couple days before hurricane landfall to see if they can tentatively pencil you in on their calendar. Wait too long and they may be booked solid for weeks depending on the severity of the area’s hurricane damage.
4. Organize digitally and take pictures!
An important part of your hurricane financial preparedness plan is physically knowing where your financial documents are. Tax documents, insurance policies, legal documents, important receipts, etc. A combination safe is a good place to store important documents. Another good option is scanning and uploading copies onto an encrypted online vault that is password protected, or even a personal thumb drive. If you have to evacuate your home in a hurry, a thumb drive is easier to take with you than a combination safe!
Another tip is to take pictures of your home from various angles, as well as your valuables, for insurance purposes. This will significantly help your public insurance adjuster make a strong case for your claim. This is your proof to show the insurance company what your home or property looked like prior to hurricane damage. While you still have power before a storm, upload photos onto the cloud or load them onto a thumb drive. Taking pictures after a hurricane is easy. Proactively taking “before and after” photos makes you an all-star in hurricane financial preparedness. This may also help to speed up your claim.
5. Budget for hurricane financial preparedness
A budget is always a good idea. For example, if you need to add a budget line item to save into the purchase of rollup shutters or impact windows and doors, do it now. No need to go into debt over this. After you do the necessary research and price shopping, set aside the money you need every month into a separate savings account. Once you’ve saved enough, go ahead and make this very important purchase for your home. Again, your homeowners insurance will go down if you make this great home investment.
6. Hurricane financial preparedness in your emergency fund
Now let’s talk about your emergency fund. What if a major hurricane hits? Will you have enough set aside in a savings account to pay for unexpected expenses and avoid going into debt? It is very easy to put big ticket items on a credit card, especially in emergency situations that affect your family.
Where do people go into debt after a hurricane? A home generator, a BBQ or portable stove, and eating out more often comes to mind. Expenses could include relocation costs if you have to evacuate your home for a few days or longer. Think hotel and rental vehicle. You may have insurance to cover some of this, but the Courtyard Marriott isn’t going to wait until your insurance company sends you a check. If your home is temporarily uninhabitable due to extended power outages or damage, living elsewhere for a period of time could prove very costly. Similarly, some home repair items can’t wait for the insurance check to arrive. Think Home Depot purchases. Bottom line: save into an emergency fund; avoid going into credit card debt.
The emergency fund isn’t only for emergency expenditures, but also applies to employment vulnerability. If you are a business owner, your business income may suffer if your business property sustains damage or the business climate changes due to the storm. Perhaps the business where you are employed suffers as a direct result of the natural disaster. Your extra personal expenses may be compounded by the potential loss of a job. How vulnerable is your job if a natural disaster strikes? How much would you need to save into an emergency fund for you and your family to live in this scenario? Do a hypothetical stress test by reviewing your normal expenses and throw in some big ticket hurricane-related expenses. How much cash will you need to set aside to live for 3-6 months?
Do these things and you’ll have a sound hurricane financial preparedness plan.
Jonathan G. Cameron is a CERTIFIED FINANCIAL PLANNER™ professional and co-founder of CameronDowning, a Registered Investment Advisory Firm in Miami, FL. Please connect with us on LinkedIn, Facebook, Instagram, and Twitter. Also, check out the rest of the CameronDowning website as well as our Financial Planning Videos page where we’ve created dozens of short videos answering many of your personal financial questions.
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