The unfortunate reality is that natural disasters are becoming an all-too-frequent and devastating part of life. Here's how to get your personal finances in order for such emergencies.
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As this past year has made vividly clear, natural disasters are becoming an increasingly common part of life. In fact, a recent survey from Wells Fargo found that four in five Americans (84 percent) now live in areas that have experienced some form of natural disaster in the past three years.

What's more, the number of disasters has increased by a factor of five over the past 50 years, according to a new report from the World Meteorological Organization (WMO), which found that disasters linked to either weather, climate, or water hazard occurred every day on average over the past half-century. The report, which has been called the most comprehensive review of mortality and economic losses from weather, water, and climate extremes to date, shows that between 1970 to 2019, weather, climate, and water disasters accounted for 50 percent of all disasters, 45 percent of all reported deaths, and 74 percent of all reported economic losses.

Despite these sorts of startling facts, most people who responded to the Wells Fargo survey (71 percent) admit that they do not have an emergency plan in place to cope with a natural disaster. Such a plan would not only address immediate needs like having a go-bag packed with essentials should you be required to evacuate immediately (or a garage filled with necessary essentials to see you through an emergency), but also being prepared in advance financially for the various realities that natural disasters bring about.

Here's a closer look at how to ready your finances for a world where natural disasters are increasingly commonplace.

Put important financial documents on a thumb drive.

In the event of wildfire, flooding, hurricane, tornado, or any other type of traumatic natural event, you'll want to be sure you have important financial and estate documents saved—and not just on paper, or stored in a closet or file cabinet, where they can be easily destroyed.

"Save important financial documents, such as birth and marriage certificates, wills, deeds, tax returns, insurance policies, and stock and bond certificates, on a thumb drive," says Rullah Price, head of public affairs resiliency and enterprise incident communications, for Wells Fargo. "These records are often needed for tax and insurance purposes."

Alternatively, you could prepare an emergency document kit, says Paul Sundin, a CPA and tax strategist with Estate CPA.

"When disaster strikes and you need to flee right away, you just grab this kit along with your other essentials," says Sundin. "This kit should contain copies of important documents, such as homeowners' insurance policies, health insurance policies and information, deeds, recorded real estate documents, and information on all investment and financial accounts. Store these in a waterproof and fireproof box."

Yet another option is to photograph or scan your paper documents and store them securely in a Cloud storage environment, where you will be able to retreive them from any device after the disaster, says John Bodrozic, cofounder of the digital home management platform HomeZada.

"Your home is probably your largest financial asset, and biggest expense so if it's destroyed by a natural disaster, you must have access to all your important records to be able to financially recover quickly," says Bodrozic.

Create a visual inventory of your valuable belongings.

You'll also want to create a documented inventory of your valuable possessions or items tied to your house that have a monetary value. To begin with, use a smart phone or camera to make a visual record of such things as cars, boats, and recreational vehicles, says Price. You'll also want to document the condition of your home.

"Photograph the interior and exterior of your home, including landscaping, making special note of any improvements, such as a patio, fencing or outbuildings, as these may increase property value and help with insurance claims," Price explains.

While you're at it, you may also want to create a written list or inventory of all your important possessions, says Pat Howard, property and casualty insurance expert for Policygenius. Howard suggests creating a home inventory of your personal belongings, such as clothes, appliances, and electronics. 

"This will increase your chances of a successful insurance claim," says Howard. "When putting together your inventory, include product descriptions, prices, photos, receipts, and anything else that can improve your chances of a more accurate payout in the event your things are damaged."

If your possessions are damaged due to a natural disaster, contact your insurance company as soon as possible and provide them with as much proof as possible, including before and after photos of your items.

Create a safety-net savings account.

Maintaining an emergency fund with three to six months' worth of savings is a key part of any household budget. But it's also important to have savings specifically for natural disasters.

"Funds that you can draw on quickly and easily can be a lifesaver in the wake of a natural disaster," Price explains.

Carrie Friedberg, of SF Money Coach recommends keeping as much as 12 months of savings in a separate account that's designated for such emergencies, if possible.

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"If a natural disaster struck and you experienced an interruption of income, you could live on this money during the transition period," says Friedberg. "Being proactive with a safety net savings account will contribute to your emotional and financial security, whether you ever use it or not."

Set aside cash.

In addition to having a designated bank account where you've squirreled away survival funds, you'll also want to have some cash on hand in your home, says Sundin.

"Cash is king when it comes to emergency situations, especially when ATMs have become unavailable. Load your emergency kit with enough cash to pay for food and other necessities for at least three days," says Sundin. "This is will certainly come in handy when it's not possible to withdraw money from the ATM or bank, when electricity is out, or when you find yourself unable to return home."

Keep a credit card or other financial tool just for emergencies.

In addition to keeping cash in your emergency kit, it's also good to have a credit card stored as well.

"You may end up without your wallet, phone, or other key items during a disaster, and even if you retain these things, you don't want to be worrying about how close you are to your credit card's limit when you're buying gas to evacuate," says Carter Seuthe, CEO of Credit Summit.

Set up auto payments for important bills. 

If a natural disaster strikes, you'll want to ensure you don't fall behind on your bills, particularly if you don't have access to electronics.

"Set up automatic payments for your monthly bills. You never know how long you'll be out of commission in the event of a natural disaster," advises Mike Martinez, president and CEO of the wealth management and financial advisory firm M Martinez and Associates.

Part of protecting your finances involves protecting your credit. In addition to establishing auto-payments for your major bills and debts, you could also reach out to creditors in the event of a natural disaster and ask for a temporary reprieve on payments, says Price, of Wells Fargo.

"It's a good idea to include the contact information for your creditors—such as your mortgage lender, credit card companies, and utilities—in your emergency document kit," Price says.

Along the same lines as establishing auto payments for bills, you might also want to have any income you receive from an employer or other sources switched to direct deposits (if you haven't already), to ensure you continue to have access to that money if you become displaced from your home, where you receive mail. 

"If you receive paychecks, Social Security checks, or other income via regular mail, you could find yourself in trouble if a disaster disrupts postal service," says consumer finance expert Tanya Peterson, vice president for Freedom Financial Network. "Many, if not most, companies and organizations now provide direct deposit at no extra charge."

Check to be sure you have adequate insurance coverage.

Insurance policies can help you recover financially from a disaster, provided you have the right coverage. Review your property, flood, life, and disability insurance policies once a year when you receive the new documents from your insurer, says Price.

"Don't focus only on your deductibles and coverage amounts—pay attention to the riders as well," notes Price. "For instance, does your property insurance cover temporary food and housing costs if you have to evacuate but your home is undamaged? If you miss work for a week because you've had to evacuate, will your disability policy cover your lost income? Talk to your agent about covering any gaps in your policies, and make sure you know whom to contact and what documentation you'll need to file a claim." 

It's also critical for homeowners understand that while standard homeowners' insurance covers most types of extreme weather, there are a couple of natural disasters that aren't covered and require additional coverage.

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"But not everyone knows this, and it often leads to people being underinsured and having to rely on federal disaster aid or covering expensive repairs out of pocket," says Pat Howard, property and casualty insurance expert at Policygenius. "For example, most people don't realize that a standard home insurance policy doesn't cover damage from flooding or earthquakes."

In fact, more than half (53.3 percent ) of homeowners don't realize that flood damage isn't covered by a typical homeowners insurance policy, and more than 80 percent of homeowners don't realize that earthquake damage is also not covered by a standard policy, according to a 2020 Policygenius survey.

"As climate change intensifies weather conditions, it's important to make sure your home and insurance policies are fully prepared in advance of inclement weather or natural disasters," adds Howard. "Many insurance companies place a moratorium on purchasing new policies once a tropical storm has been announced by the National Weather Service, so it's important to check your coverage and make any adjustments you need to well in advance of hurricane season."

Have your roof inspected.

It's possible that your insurer won't cover roof damage after a natural disaster if they believe your roof was previously in poor condition. If it's been several years since you've had a roof inspection, especially if it's older, consider getting it inspected and share passed inspection documentation with your insurance company.

"Having proof of a passed roof inspection with photos or videos can improve your chances of a successful claim," explains Howard. "After a storm, contact your insurance company as soon as possible to let them know of any damages, and document the damage thoroughly before you start making temporary repairs."

Use a checklist.

These financial preparations are merely one part of a comprehensive, overall disaster response and recovery plan. For even more guidance on how to prepare for natural disasters, check out the Federal Emergency Management Agency (FEMA) website where you'll find information and guidelines and checklists to help you develop emergency plans.

The website includes instructions on everything from how to build an emergency kit stocked with the right items, to making a plan for emergencies, and preparing children for disasters.

"Just remember—the more you prepare now, the less you'll have to do if disaster strikes," says Price.