In an emergency you won't have time to stop and look for your checkbook. Whether it's a Florida hurricane, California wildfire, or Texas twister -- or a manmade disaster -- it pays to be prepared.
Make sure you're covered
Most everyone needs a helping hand in times of job loss, injury or rebuilding. Make sure you have the cold hard cash needed to soothe any disruption that comes your way.
Fund your emergency fund. Set aside enough cash to cover three to six months of expenses and pay for any insurance gaps or deductibles. If you lose your job or a loved one who provides financial support, this fund will tide you over until you can get back on your feet. Avoid locking the money up in certificates of deposit or stocks. Your emergency money should be there when you need it. Focus on liquidity and safety.
Check your homeowners and renters insurance. Jeanne Salvatore, spokeswoman for the Insurance Information Institute, recommends taking an inventory of your possessions to make sure you adequately covered. You may also want to take snapshots of some of your more unique belongings -- such as antiques or collectibles -- and keep the list with your policy to help value items if claims need to be filed.
Salvatore also recommends that homeowners check the cost of rebuilding. Bring in a contractor to give you an estimate or speak with a local real estate agent or builders association to find out the cost of new home construction in your neighborhood.
Although standard homeowners insurance will protect you if a major storm hits (see "When a Twister Blows Through Town"), it will not provide flood or earthquake protection. Homeowners and renters can buy added coverage for these disasters, but even extended coverage won't protect you from acts of war. You might also find that your home business is not adequately protected.
For more information on homeowners or renters insurance, check out the Insurance Information Institute's Web site.
Buy life insurance. Generally, you should consider enough life insurance to replace your income -- short-term and long-term -- if you die. Twenty-year level-term policies offer the best deals right now, but picking the best policy for your situation will depend on several factors. For more information on buying life insurance, see our Life Insurance Made Simple.
Purchase disability insurance. Look for a policy with a high income-replacement percentage (60% to 70%). Most people get some level of disability coverage through their jobs. But if you purchase your own, benefits won't be taxed. For more information, read "Do You Have Enough Disability Coverage?"
To get answers to your insurance questions, call the National Insurance Consumer Helpline (800-942-4242).
Gather important documents
A will provides the ultimate insurance, by outlining how your finances will be handled after your death (see "Why You Need a Will"). You also should have a living will to explain your wishes about life-sustaining medical care if you become terminally ill and are unable to speak for yourself. (See "Document Your Health-Care Wishes".)
You can create a will using software such as Kiplinger's WILLPower. Nolo also offers software for will and estate planning.
Other documents you might need to claim benefits and ensure your financial security include:
Birth certificates
Citizenship and adoption papers
Marriage license and divorce papers
Social security card
Insurance policies (You must have the original life insurance policy to claim benefits.)
Medical records and information
Deeds to property, automobile titles, mortgage papers, leases
Military records
Household inventory list
Investment records
Step 3: Safeguard your documents
Copy hard-to-replace documents and store them in a safe place. You should keep the items listed above in a safe deposit box or fire-resistant home safe. Put the items in plastic bags to protect them from water damage. Keep a list of everything in your safe and give it to a trusted relative with directions on how to open it.
However, do not keep wills in a safe deposit box. It can be difficult for family members to gain access and might require court supervision to open. Keep a copy in your home safe or at your attorney's office. The original usually is kept with the county registrar of wills.
Back up important computer files on a CD-ROM or online.
Finally, know where your spouse keeps his or her financial records so you can access them if something were to happen.
If you have more questions about guarding your finances in a time of a tragedy, contact the Financial Planning Association's e-mail hotline.
GETTING STARTED
