Are you prepared for a disaster? Do you have your financial papers in order, and in a safe place? If a catastrophe strikes, will you be able to piece your life back together?
If you've been watching the horrific stories of people trying to find food and shelter in the aftermath of Hurricane Katrina, then you need to read my column today, because this calamity is a wake-up call for all of us -- me included.
If we heed the call, then perhaps some good can come of this tragedy if it motivates us to do some disaster planning. (For more advice and discussion, join me and my guest, certified financial planner Arthur Stein, at noon ET today for a live online Q&A session. Stein is vice president of First Financial Group in Bethesda. Md.)
If you're not sure what steps you should take to prepare, check out the tips from the Financial Planning Association in today's column. For example, the association recommends that you have an "evacuation box" that is fireproof, lockable and light enough to carry in an emergency. Keep all your important financial documents in this box.
Unfortunately, many of Katrina's victims will have trouble piecing their lives together because they lack key documents.
"As tens of thousands of families and businesses are struggling to rebuild, many are without the paper and perhaps even electronic records and resources fundamental to the working of American life and commerce," reports Albert Crenshaw (Sept. 2, "Rebuilding, Without Financial Records"). "How do you get a credit card bill, let alone pay it, when your house is gone, your very address is gone, your bank's offices are gone?"
Government agencies including the Internal Revenue Service, mortgage companies such as Fannie Mae and Freddie Mac, and even some credit-card issuers are offering relief, Crenshaw reports. The IRS has set up a task force to try to work out other forms of assistance that might benefit taxpayers in the afflicted areas. And the U.S. Postal Service has set up a "New Orleans" post office at the Astrodome in Houston, where many hurricane refugees have been taken.
If The Storm Comes
Do you have enough insurance coverage in the event of a natural disaster? Specifically, do you have flood insurance?
Many homeowners think their basic insurance policy covers flooding. It doesn't. Even if you're not in a high flood-risk area, you may still need protection. Twenty-five percent of all flood insurance claims are filed in low- to moderate-risk areas, according to the National Flood Insurance Program.
As Crenshaw says in his column ("'Under-Bought' Flood Insurance Proves Its Value," Sept. 4) flood insurance can be immensely valuable. NFIP policies will pay up to $250,000 for residential buildings plus another $100,000 for contents that are lost. It will also pay up to $500,000 for nonresidential buildings and $500,000 for their contents.
And flood insurance isn't that expensive. The premiums average around $400 a year. Crenshaw quotes J. Robert Hunter, who once headed the program as federal insurance commissioner, as saying federal flood insurance "is a greatly under-bought product."
