Prepare: The end may be near
TERRY SAVAGE firstname.lastname@example.org Oct 29, 2007
Updated: May 3, 2013 12:14PM
If you had to run, what would you take with you? Watching all those California houses go up in flames last week was a frightening reminder of some important Savage Truths. First, nothing is as important as life -- yours, your family, perhaps even your pets. That's what everyone grabbed as they ran -- along with precious family photos.
These awful television scenes are a reminder that it makes sense to have a discussion with your family about what you'd want to take -- and how you'd carry it -- if you had just moments to escape from fire, flood or earthquake. An escape plan, a re-connection plan, as well as a "what to take" plan are critical.
The second truth is that if you're properly insured and take appropriate precautions to bolster your insurance claim, the process of recovering your assets will be less painful.
Here's what everyone should do now, in advance of disaster.
Check your coverage
Contact your homeowners insurance agent now. Though housing prices are falling, the cost of rebuilding after a fire or flood continues to rise. Make sure you have enough basic coverage on your home and its contents.
Then make sure your coverage includes replacement cost. When you rebuild, you won't put in a 10-year-old dishwasher or oven, and it will cost far more today to replace the couch you bought a decade ago. Similarly, if your home has expensive building materials such as a slate roof, you won't want your next home to have tar shingles.
The best policies offer a "cushion" of perhaps 20 percent on top of the stated value of rebuilding your house. Thus, if your home construction is listed as having a value of $500,000 but it costs $600,000 to rebuild with the same quality materials, you'll be covered for the overage.
Best bet: Get a written estimate from an architect or builder, stating the current local cost per square foot for constructing a home similar to yours in quality and materials.
The contents of your house are listed separately, and typically insured for 75 percent of the value of the home itself. But if you have expensive carpeting, wall covering, lighting or furniture, you'll want to document that fact, and increase the contents coverage.
Then if you have expensive artwork, silverware, jewelry or furs, you'll want to "schedule" or separately insure them. That will require getting written appraisals, which might need to be updated every few years.
Keep extensive records
Just having enough insurance, and the right kind of insurance, doesn't guarantee that you won't have a hassle. You need documentation of the cost of everything -- the kind of documentation that includes purchase receipts, photos, appraisals and perhaps even a videocam CD with a tour of the house, pointing out special features and upgrades.
Then store that information off-site in a safe place! It might be worth paying for a safe deposit box in a bank to store these records. Or you might leave them locked up at your office, or at the home of an adult child in a different location.
Similarly, you'll want to store important financial records -- or copies -- in an offsite location. Major companies have followed this practice for years. Regularly back up your computer on CD, and take a copy to a different location. Your accountant should have a backup copy of your tax returns; your bank should be able to reconstruct your checking account.
Get ready to run
So if you had only a half hour and your car, what would you take with you? If you're organized and keep your financial records in a simple filing system, you can easily take the most important documents.
Best bet is to store your important information in a metal file box with a handle. If you have everything in one room, you can quickly load it up. We all hope that day will never come. But after California, Katrina and other disasters, it makes sense to be prepared. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.