Financial Checklist to Prepare for an Emergency

Disasters can strike at any moment. People may have the medical and food supplies for an emergency or disaster, but are they financially prepared? This 5 step checklist is a great starting point for having the financial security to weather both a natural disaster/emergency and the aftermath.

Natural disasters and emergencies happen without notice. Some people may receive a 48-hour evacuation notice, but at that time, it is too late to make any financial changes. When the worst-case scenario does happen, preparation plays a significant role in navigating the aftermath.

I live on the San Andreas fault line. Not near the fault line, but directly on it. I know one day I might have to respond to the Big One, but I hope that day is a long way off. Until that day, I am prepared for when it does happen.

Have adequate insurance

Adequate insurance means the amount covered by the policy is enough to make you whole. Take time to inventory items that will be insured and determine an accurate value to replace them. It's also imperative to understand the perils you may face — if you live in an earthquake-prone area, insurance without earthquake coverage means you can lose everything in an earthquake and the insurance company would owe you nothing.

Car owners should ensure adequate comprehensive coverage for theft, vandalism, fire, riots, falling objects, storms, hail, winds, floods, earthquakes, and accidents involving animals.

Homeowners and renters should ensure both personal property and dwelling are covered (renters won't have dwelling coverage), and check for riders covering floods, earthquakes, and sewage backup — perils typically excluded from standard policies.

Have cash on hand and easy to access

In a natural disaster, power may not be available, and banks, ATMs, and credit cards may not work for hours, days, or even weeks. My rule of thumb is that a household should have up to 3 days of cash on hand — roughly $100 for each person in the household.

Have an adequate emergency fund

The emergency fund provides financial safety for emergencies like natural disasters. An emergency fund should have 3-6 months of expenses saved in a savings account. Avoid investing the emergency fund — its purpose is to provide cash at a moment's notice, and it can be devastating to wait for the stock market to open to access funds for a basic necessity.

Store important documents in easy-to-access locations

Natural disasters can destroy belongings within minutes. Important documents include passports, checkbooks, social security cards, wills, and powers of attorney. Store physical documents in a secure location at home, and also keep digital copies on your phone or in cloud storage — this way you have access even if one format is destroyed or unreachable.

Be aware of scams

The FBI warns of an increase in charity scams since the start of COVID-19, along with unethical contractors and insurance fraud after disasters. Do diligent research on people and organizations offering assistance, be skeptical of copycat names, avoid donating through cash or wire transfer, and vet contractors before hiring them.

Someone can never have complete protection during and after a disaster, but there is a big difference in how someone's preparation affects the aftermath. Protecting ourselves financially for whatever life throws at us is an important part of the Developing Financial Process.