By Lynnette Khalfani-Cox, The Money Coach®
Natural disasters, weather-related catastrophes and other emergencies can strike at any time. When they do, you’ll no doubt want protection for what’s most likely your most costly asset: your home. None of us can outrun windswept fires, massive earthquakes or torrential flooding. And even the latest technology available cannot accurately predict these potentially life-and-property threatening dangers. You can, however, help safeguard your property before disaster hits.
Here are some tips to protect your home against natural disasters.
Tip #1: Get Adequate Insurance
Start by reviewing your homeowner’s insurance policy. Check that you have sufficient “replacement cost” coverage – meaning enough coverage to completely replace, rebuild or repair your home in the event of a catastrophe. If you’ve owned your home for a while and property values have risen, you may not have enough insurance. So ask a local home contractor to come out and give you a written analysis of how much it would cost to rebuild your residence if it were to be completely wiped out. Then make sure your homeowner’s insurance policy has enough so-called “replacement cost” coverage to rebuild your home from the ground up in its current condition.
Tip #2: Read the Fine Print
You also need to know exactly what is – and what isn’t – covered in your current insurance policies. For instance, a “wind event” – like a tornado – is usually covered under most homeowner’s insurance policies. However, other disasters – such as earthquakes, floods, landslides and natural fires – are typically not covered by homeowner’s insurance. To get protection against these disasters, you must buy separate catastrophic insurance coverage.
Tip #3: Strongly consider buying supplemental catastrophe insurance
The United States has roughly 20,000 earthquakes annually, and 42 states are at risk of quakes, according to the U.S. Geological Survey. Among these, California is especially prone to earthquakes. In fact, the Northridge earthquake that struck Southern California in January 1994 remains the most costly earthquake in U.S. history, having caused $44 billion in property damage, the Insurance Information Institute reports. And even though scientists say there is greater than a 99% probability that the Golden State will be shaken by a magnitude 6.7 quake – which is comparable to the powerful 1994 Northridge temblor – only 11% of California households currently have earthquake insurance.
The California Earthquake Authority is the state-run entity that is the largest provider of earthquake insurance in America. Other forms of catastrophe coverage exist at the federal level. For example, the federal government underwrites flood insurance. The maximum coverage amount you can get is $350,000, which includes $250,000 for the structure and $100,000 for contents in your home. While the average cost of flood insurance nationwide is about $700 per year, prices vary from around $350 annually in low-risk areas to more than $7,000 a year in high-risk zones.
Even though the cost of insurance can really add up, not being insured can be financially devastating. For instance, when Hurricane Harvey struck Houston, Texas in 2017, 80% of property owners there did not have flood coverage.
Tip #4: Document Your Valuables
Another important way to prepare for a disaster is to photograph or videotape the contents of your home or apartment, especially any expensive items you own. Don’t forget to make a record of what’s in your garage or outdoor shed as well. Having documented proof of your household items can make things easier when you’re dealing with your insurance company – and that goes for people with homeowner’s insurance as well as those with renter’s insurance. Additionally, photographic records can help for tax purposes, aiding you in proving the market value of items for casualty loss claims. IRS Publication 584 is a disaster loss workbook that you can utilize to create a room-by-room list of your belongings.
It’s never easy to recover from the fallout and havoc wreaked by calamities such as earthquakes, floods or fires. But by taking a few precautionary measures, and planning for a worst-case scenario, you can at least be better prepared financially.
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