An expensive hurricane, what we learned, and how to prepare for the next major event.
Our hearts go out to the residents of Houston and southeast Texas and Louisiana who are struggling to rebuild their lives and communities in the aftermath of Hurricane Harvey. While many of our clients and business partners have reported little to no damage, others have not been so lucky. Many face years of financial uncertainty; people’s livelihoods and the states’ economies will continue to be battered long after the hurricane winds have abated.
Hurricane Harvey ranks as possibly the most expensive weather event to hit the United States since 1980, and the cost of clean-up is expected to be close to $100 billion. But Hurricane Harvey is only one of many devastating natural disaster events to hit the United States in 2017. Nine others in the current year have caused over $1 billion of economic damage.
For those who live in natural disaster-prone areas, these types of catastrophe give pause for thought and impetus to organize their financial affairs.
Insurance is No Panacea
Tragically, of the $30 billion estimated in damages to homes, only 40 percent is thought to be covered by insurance. Although private homeowners’ policies typically include coverage for wind and storm surge damage, coverage for flooding is underwritten by a federal program that is chronically underfunded. Moreover, many people who live in flood zones don’t buy coverage or fail to keep up with the premiums.
Perhaps we are closing the stable door after the horse has bolted, for this advice is clearly tardy for Hurricane Harvey victims, but this article could prove timely for others who are in the path of the next natural disaster (Hurricane Irma is rapidly encroaching on Florida).
1. Acts of God – or Acts of Carelessness?
When it comes to insurance, what exactly is an “Act of God?” Well, it depends. Typically, it is an event that could not have been avoided. For example, unlike a hurricane, a fire in a home would not be considered an Act of God because it could have been prevented; perhaps someone was careless, or the house was poorly wired during construction. The concern is whether your home or possessions are covered against Acts of God. To find out what is covered, ask your insurance company to list what is included and excluded in your policy.
2. Evaluate the Risk of an Area Before You Move
Before you move, look at weather patterns and the history of the area to which you intend to move. Risk factors such as low elevations, fault lines, and flood zones should play into your decision to live in a certain area.
3. Insure Yourself Wisely
Homeowners insurance is vital, but not all plans cover floods, tornadoes, earthquakes, or hurricanes. It is important to understand what your policy covers (or more importantly, what it does not) and apply for supplemental coverage, if appropriate.
4. Save for Emergencies
Everyone should set aside money for an emergency fund. At least six months’ pay is recommended, and these funds can be used for any number of reasons including to recover from disaster.
5. Consider Trust and Estate Planning
Estate planning is important, and one thing it serves to do is to protect your family in the event of a natural disaster should you die or become incapacitated as a result of the disaster. Your financial and medical wishes will be followed if you are unable to communicate your wishes or consent. Consider taking the following actions when planning for the future and particularly for disasters.
- Keep critical documents, such as wills, bank account information, and insurance policy information in a place that is protected from the disaster zone. A safety deposit box or a fireproof safe are two examples. Storing a copy electronically is also recommended now that cloud document storage is more widely used and affordable.
- Provide personal representatives and trustees copies of your current wills, trusts, and powers of attorneys or provide access to your 401k, IRA, and investment accounts by giving them any necessary passwords, paperwork, and account information.
While nobody expects a disaster to strike, if it does, it can be of some relief to know that your paperwork is taken care of and your family and assets are protected. If you would benefit from a second-opinion on your existing insurance coverage or need an estate planning attorney, don’t hesitate to reach out for an introduction to one of our strategic partners.
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