7 Steps to Prepare Financially for Disasters

If you think your household finances are invulnerable to disaster, think again. Just one flood, fire, earthquake or tornado could wipe out your life savings. Before misfortune hits, it's vital to secure your finances from unexpected events of nature. 

Here are seven steps to protecting your home and finances.

1. Get the Right Insurance
Review your insurance policies to ascertain what they do and don't cover. Keep in mind there's a big difference between replacement cost coverage and standard coverage, which only pays the actual cash value of insured property. Be sure that you have enough insurance to cover recent home renovations or improvements. Learn more by visiting Fema.gov, and the Insurance Information Institute.

2. Purchase Flood Insurance
As many Hurricane Katrina survivors sadly learned, most homeowners insurance polices don't cover flood damage. Look for flood insurance that will cover both your structure and the contents. Renters and business owners also should purchase coverage. Nearly 100 insurance companies in more than 21,000 participating communities offer flood insurance at an average of around $500 a year. Learn how to protect your property at FloodSmart.gov or call 1-800-427-2419.

3. Inventory Possessions
Keep a written and video or photo record of all major household items and valuables, including those stored in your basement, crawlspace, attic and garage. Create files detailing serial numbers and store receipts for major appliances and electronics. Have jewelry and artwork appraised. These documents are critically important when filing insurance claims. For help in conducting a home inventory, visit KnowYourStuff.org. or the Insurance Information Institute.

4. Protect Documents
Store copies of irreplaceable financial and family documents in a safe place, preferably one protected from both fire and water. Store the originals in a safe-deposit box so there's no chance of them disappearing during a disaster. Alternately, you might load copies of some of these documents to a secure Internet server that can be accessed from off-site computers. Vital documents include automobile titles, birth and marriage certificates, tax records, stock and bond certificates, trust agreements, deeds, wills, photos, passports and insurance policies and your home-inventory file. 

5. By the Numbers
Because credit cards, drivers licenses and other pieces of plastic can disappear in a disaster, it's helpful to keep the details of these documents in a separate location. For credit cards, include the customer-service contact information, card number, expiration date and the three-digit security code (on the back of the card). 

6. Keep an Emergency Fund
Keep enough cash or traveler's checks in a safe place that can be quickly accessed. ATM's may not be available in the event of a disaster. Also, consider opening up an emergency savings account or designating a credit card exclusively for emergency use. 

7. Safeguard Your Home
Take steps to minimize potential damage to your home by installing smoke detectors on every floor. Consider hurricane shutters for windows or store large sheets of plywood in the event of high winds. For homes in earthquake-prone areas, anchor large objects that may topple and cause damage, including televisions, upright household appliances, china cabinets, bookcases and hot-water heaters. Reinforce your roof and foundation moorings in case of tornadoes or hurricanes.

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