It can happen to any of us…
It doesn’t have to be a historic outbreak, hurricane, flood, or wildfire. You could be at risk from a broken water pipe, a tree falling on your home, or some other event.
Bottom line: You don’t want short-term events to cause a permanent reduction in your financial security.
Work through this Estate Plan Disaster Checklist to be sure the worst you’ll experience from such events is some inconvenience.
Step 1: Prepare your financial emergency kit.
Certain documents are very helpful to surviving a catastrophe, and rebuilding afterwards. The faster you can place your hands on these documents, the faster you’ll recover.
You need access to the latest copies of statements for bank accounts, investment accounts, credit cards, mortgages, and any other debt. You also need copies of tax returns.
Of course, you need the policies for homeowner’s, automobile and any other insurance you have.
Then, there are the always-essential documents: your will, trust, power of attorney, health care advance directive, and any other estate planning documents.
You want copies readily available to you, and you want the original, or copies, stored safely from catastrophes.
Some people use bank safe deposit boxes. Others have home safes or disaster-proof lock boxes.
These days, digital storage is a good option if the storage is safe from disaster. Having digital copies on your hard drive or thumb drive at home isn’t useful if they’re also damaged.
Step 2: Assess emergency reserves.
We’d all like 100% of our assets to be working in the markets to increase our net worth.
For emergencies though, you should have some liquid assets that can quickly be converted to cash without having to sell investments and wait for the transactions to clear.
The amount of cash you should have depends on your situation. Most advisers recommend three to six months of emergency reserves.
But you might need more, depending on the extent of the disasters for which you are at risk, and how long your insurance coverage might take to begin disbursements.
Keep in mind that in a real disaster, you might need more than your daily living expenses. You might need temporary housing and a rental car, or you might need to replace items you use in daily life, and household goods.
Step 3: Match insurance coverage to your risks.
Standard homeowners insurance doesn’t cover flooding. Flood insurance is bought separately.
A high percentage of people in hurricane-prone areas don’t carry flood insurance. Flood insurance is required only if you have a mortgage and live in a designated high-risk flood zone.
It can be expensive, and the lower incidence of hurricanes and floods over the last decade made some complacent.
Flood insurance can be a good idea even if you’re not in a hurricane zone, because a flood from any cause can result in substantial damage in a hurry.
Talk with your insurer or insurance agent about the other limits of your homeowners insurance and the risks that aren’t covered.
Many people are surprised by what their insurance doesn’t cover, but can be covered with an additional rider.
Also, know which costs of an incident aren’t covered. Does your policy reimburse for damage to household goods based on their current value or their replacement cost?
How much will the policy pay for temporary housing if you’re displaced because of a flood, fire, or other event? How quickly can reimbursements be made?
In next week’s issue of Retirement Watch Weekly we’ll explore more ways you can protect your estate from disaster… natural or otherwise.
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