Learn important lesson from Sandy’s destruction
BY TERRI SAVAGE firstname.lastname@example.org November 4, 2012 5:30PM
Chris Santos looks through a hole in a partially collapsed basement wall of an oceanfront home, Sunday, Nov. 4, 2012, in Belmar, N.J., as he checks for severe structural problems in foundation and basement damage from Monday's storm surge by Superstorm Sandy. (AP Photo/Mel Evans)
Updated: December 6, 2012 6:23AM
In the past year, we’ve seen tornadoes sweeping across middle America, rivers flooding their banks along the Mississippi, and out-of-control wildfires destroying homes in California, Colorado and Texas. But watching the ocean sweep across Wall Street, flooding the New York subway system and destroying a whole section of Queens and New Jersey, must finally bring home our total vulnerability to nature.
An unexpected and life-changing event can happen to any of us — no matter where we live or how much money or property we have amassed. And the consequences can be devastating, whether your home and contents are totally wiped out, or your photos and personal finance records are washed away.
Businesses know they must have backup systems. But most Americans — even those who are good about organizing personal records — have no “Plan B” in case disaster strikes. Maybe it’s time to start thinking more seriously about that. Here are some suggestions:
Double-check your insurance
Of course, you’re smart enough to have replacement cost insurance for your home and contents. But have you increased your coverage to keep up with rebuilding costs? Do you know your deductible — and what is excluded? Hurricane coverage is not automatically included in your policy. Residents of the East Coast caught a break when Sandy was officially downgraded from a hurricane to a cyclonic storm. That meant wind damage was covered, something that would not have been a sure thing if the storm were still a hurricane, unless specifically included in the policy. Most policies do cover wind damage from windstorms and tornadoes but may require specific additional coverage if damage comes from a hurricane.
Those who do have hurricane coverage need to remember that there is a much larger deductible for hurricane coverage, and it is typically expressed as a percentage. Your deductible could be as much as 5 to 10 percent of the total loss — leaving you exposed for a lot of money out of your pocket. Similarly, those who live in areas prone to earthquakes would need separate coverage unless earthquake coverage is written in your policy as a “named peril.” And earthquakes are not limited to California. Think New Madrid fault, which runs through the Midwest.
Most homeowners remain unaware that storm water damage coming from a flood surge may not be covered under their homeowners policy. Unless you are covered by the Federal Flood Insurance program under a separate policy (888-724-6924 or floodsmart.gov), you may find your coverage sorely lacking. There may be no ocean or river nearby, but a backed up sewer can cause huge damage that would not normally be covered by your homeowners insurance — unless you have an inexpensive but specific additional coverage for that eventuality.
If your car is damaged by the flood, it would be covered under the “comprehensive” portion of your auto insurance policy. Similarly, if a tree hit your car as a result of a windstorm, repairs would be covered. But if a tree falls in your yard, and does not hit your home, your homeowner’s policy will not cover the costs of removal.
Mold damage may not be covered in your policy — but could be covered if it was caused by a covered peril such as a storm (but not a hurricane). With all these fine lines in insurance policies, it is wise to check with your insurance agent before a catastrophe occurs.
Duplicate your records
As overwhelming as the financial loss from a natural disaster can be, if you watch the television news reports, you must be struck by the loss of things that money cannot replace, including family photos, precious documents, bank and tax records, and all sorts of memorabilia.
While many of these items can never be recovered, some can be duplicated — if you prepare in advance.
If the family photo album is washed away, there’s little likelihood of seeing it again — unless — you kept a copy of those photos in an online storage service. There are many that will do the job of storing photos, videos, and even scanned documents (such as a copy of your will, cemetery deed, military separation records) securely in the cloud.
Similarly, your bank records and credit card information will be stored by your financial institution along with your stock purchase records. Or you can use a program like Quicken, which in addition to residing securely on your personal computer, also offers cloud storage. You can store your tax returns securely online through TurboTax. Then your only problem is remembering all the passwords to the various secure online storage places!
But most of this won’t just happen until you actually take action to sort out your most important papers and documents and either store or scan them online. As a guide to help you figure out what you might want to keep, you can get my personal financial organizer form, by filling out the yellow box on my website, TerrySavage.com. That will guide you through the process — but it is still a vulnerable piece of paper. So once you’ve finished the four-page form, which asks for the location of all these records, phone numbers of attorneys and insurance agents and brokers, as well as your credit card account numbers, you’ll want to make a copy of the completed form and store it off-site in a secure location.
Businesses today have learned the wisdom of disaster preparation, and they have experts to help them deal with these risks. As the risks literally come closer to home, you need to become your own risk manager. Imagine being one of the people you see on TV after a natural disaster, and you’ll know how to plan. You may never need this preparation, but if you do, you’ll be glad you took the time. And that’s The Savage Truth.
Terry Savage is the Chicago Sun-Times’ nationally syndicated financial columnist, and a registered investment adviser.