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Protecting Your Personal Finances Before a Disaster Strikes

Home > Debt Help Advice > Protecting Your Personal Finances Before a Disaster Strikes

As the 2013 Atlantic hurricane seasons kicks off, it’s time to think about financially preparing for a natural disaster.

When Superstorm Sandy tore through the Northeast in 2012, millions of residents were left without their most precious possession — their homes. The damaging winds not only destroyed their houses, but also wiped away much of their savings in the aftermath, leaving them in debt.

The National Oceanic and Atmospheric Administration (NOAA) predicts this hurricane season, which started June 1, will be above normal to extremely active. Understanding the risks associated with natural disasters and how you can put your finances in order before chaos ensues is an essential part of maintaining stability in the face of change.

Financial Impact of Natural Disasters

  • The deadly Oklahoma tornadoes that swept through the state in a two-week period in late May caused devastation that resulted in property and insurance claims equaling at least $85 million. The Oklahoma Insurance Department estimates that uninsured losses from the storms amount to $2 billion.
  • Flooding from Superstorm Sandy, part of 2012’s Atlantic hurricane season, caused close to $70 billion in losses, especially to coastal areas. Many of the homeowners in these parts elevated their existing homes — costing them between $10,000 and $100,000 in renovations. Although roughly 70 percent of the flood-related insurance claims are closed, 30 percent remain open, leaving people waiting to hear from their insurance companies. Additionally, flood insurance premiums have increased to as much as $30,000 a year, according to the New York Times. Sandy is the second costliest Atlantic storm after Hurricane Katrina (more than $125 billion in damages).
  • Hurricane Andrew, which slammed straight into Miami on Aug. 24, 1992, caused more than $26 billion in damages and changed the landscape of South Florida’s housing market. New codes increased the price of a new home by nearly $20,000, according to a report in the Sun-Sentinel. Insurance rates more than doubled and some homeowners were forced to purchase policies to insure their homes against wind damage.
  • Hurricanes Ivan, Frances and Wilma left thousands of Florida homeowners living in coastal regions in 2010 without insurance after State Farm, the state’s largest insurer, cancelled their policies. The insurer said severe losses from the 2004 and 2005 destroyed its business. Those storms caused a total of $37.8 billion in damages.
  • In October of 2007, wildfires ravaged Southern California, driven by the Santa Ana winds and destroyed more than 2,000 homes. Homeowners filing claims suffered great loss, as reimbursement was based on current market values which had dropped based on the state of the 2007 housing market.

Insurance: What Does It Cover?

Now that you know the extent these massive natural disasters had on others’ homes and insurance policies, it’s time to prepare for the financial losses that threaten your home by making sure all your important financial, insurance and mortgage paperwork is safe and secure.

Get out your homeowners insurance to familiarize yourself with your policy. If you decide to change anything, you may want to see if you qualify for a senior discount, which you may not have qualified for when you first purchased your policy. This can help with expenses, if you decide to pay for more coverage.

You want to find answers to these questions in your documents:

  • What is my home’s deductible?
  • Does my property insurance cover temporary food and housing costs if I have to evacuate my home when the home is not damaged?
  • What is excluded in my windstorm deductible?
  • What do I own?

Put together an inventory of major personal belongings and take pictures of these items, so that that can be replaced if they are destroyed.

As you read through the fine print, consider the risks that accompany the location where you live. Learn the possible weather hazards and the degree to which your policy covers these. You should determine whether or not flooding is a risk in your location. Flood insurance, which is not covered by basic home insurance policies, is one of the most common claims following disaster. Plan ahead as it may take up to 30 days for a change in your policy to take effect.

Make sure to have a list of both personal and business property. Small business owners can protect their investments by taking pictures of their business property and keeping receipts for large purchases with property inventory. FEMA helps not only homeowners, but business owners, offering resources to help reduce the loss of property, which can help them avoid small business debt.

Emergency Cash Fund

Having access to cash is an important part of financial mitigation. This includes having money set aside at home, in a bank savings account and with online banking.

Natural disaster can cause electricity and Internet to be out for extended periods of time. This may result in debit and credit machines not working, requiring that all transactions be made in cash. You should set aside cash for provisions for at least three to four days.

There should also be an emergency fund in your bank account. It’s not always easy putting money aside, especially when you’re paying a mortgage, student loans, credit cards or other types of debt that make saving money a challenge.

While many people start with $1,000, it’s good to work toward having enough savings to cover three to six months of living expenses such as utility bills, groceries and rent or mortgage payments.

Utilize online banking and direct deposit. Many older people put off setting up online banking, which can be extremely convenient — especially in the event of an emergency.  If the roads close because of a disaster, it may be difficult to go to the bank. Keep track of your finances and get immediate access to your paycheck by enrolling in direct deposit.

Protect Your Financial Documents

Remember to submit claims to your insurance company immediately after a disaster, because often claims are handled on a first come, first serve basis. The sooner you file reports, the sooner they will be addressed.

Protect your credit by keeping documents containing data on your creditors together. This includes your mortgage lender, utilities and credit card companies. After a disaster, you will be able to quickly contact them to request for a reprieve from payment.

Prepare a will. Plan where your money should go if something should happen to you. By making a record of financial power of attorney, a trusted friend can make financial decisions if you are unable to.

Additional documents you should print and keep in a water and fire proof locations include:

  • Health Insurance
  • Car Insurance
  • Family Medical Information
  • Birth Certificates
  • Deeds
  • Copies of Social Security Card and Driver’s License

Seeking Financial Assistance

People living in federally declared disaster areas may seek government assistance for housing rental, home repairs, post-disaster trauma counseling, grants, and low-cost loans to cover uninsured property loss. Additionally, the American Red Cross, Salvation Army and local volunteer organizations offer services.

These resources are at your disposal when disaster strikes, but before a storm comes, you have the ability to use your time and money as a buffer against whatever the future holds.

About The Author

Alanna Ritchie

Alanna Ritchie is a content writer for, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College.