Shielding Your Finances from Disaster

Recent catastrophic events, ranging from natural disasters to terrorist attacks, have clearly demonstrated that the homes and livelihoods in which Americans have invested over many years can be wiped out in a matter of hours. Once displaced, many victims of disatsters struggle to get back on their feet financially. While there is little that you can do to prevent a disaster from striking, there are steps you can take to protect yourself and your family from financial ruin should you be forced to evacuate your home in an emergency.

Here are some strategies you can use to prepare financially for potential disasters:

Store important documents in an "evacuation box." Collect and make copies of all your key financial and personal documents, including passports and birth certificates, marriage licenses, wills, property deeds, insurance policies, mortgage records, car titles, and stock and bond certificates. Make copies of the front and back of all credit cards and driver licenses. Then make a list of all your account and credit card numbers, as well as a written and photographic inventory of all your valuables. You should also prepare an envelope with enough cash or travelers checks to last your family about three days.

All essential documents should be stored in a bank safe-deposit box located some distance from your home or in an airtight, waterproof, and fireproof safe or container that can easily be taken with you in an emergency evacuation. Inform family members or trusted friends of the location of the box in case you are not able to retrieve it yourself.

Make sure you have access to cash. Avoid tying up all of your assets in real estate or investments that cannot be tapped without incurring significant penalties. Maintaining funds equal to three to six months' income in a savings or money market account should be among your top financial priorities. You may also want to have on hand several credit cards with high available balances or arrange in advance a line of credit that could be used in an emergency. If you have a 401(k) account with your employer, find out whether your plan allows you to take a loan out against your savings. Consider making contributions to a Roth IRA, which carries fewer penalties for early withdrawal than most other tax-advantaged retirement accounts.

Protect your property. If you live in an area that is frequently hit by natural disasters, consider what you can do to mitigate potential damage to your property. Depending upon the type of disaster likely to strike, you may want to take steps such as anchoring the foundation and roof, installing hurricane shutters on windows and glass doors, adding fire resistant siding, securing objects that could fall, moving furnances and electrical panels to upper levels, installing smoke detectors, and clearing brush from around the house. If you are uncertain about what improvements might be most effective, ask a building inspector to recommend structural or other types of changes. By taking measures to protect your home, you may also be able to negotiate a reduction in your homeowners insurance premiums.

Purchase necessary insurance coverage and review your policies regularly. Many people who have lost their homes to disasters find their insurance policies do not cover the cost of rebuilding. If you have homeowners insurance, review your policy annualy to ensure it reflects the actual replacement cost of your home and its contents. This is especially important if your home has risen significantly in value or if you have made improvements to the property. Be aware that your policy may not cover damage do to specific causes, such as flooding. If the insurance you need is not available through private companies because you live in a disaster prone area, find out whether state or federal insurance pools would provide coverage.

In addition to homeowners insurance, you should consider disability coverage to protect yourself and your family in case you are injured in a disaster and are unable to work for a period of time. If you receive health benefits through your employer but lose your job, you can keep your coverage in force under a federal law known as COBRA. You should also make sure that your life insurance coverage is sufficient to meet the needs of your family. Keep in mind that it may be possible to withdraw some or all of the cash value from a whole or universal life insurance policy if necessary.

Your individual circumstances will ultimately determine what steps you should take to protect yourself and your family from a possible disaster. You may also want to consult with an attorney about whether your family would benefit from additional legal protections, such as trusts, powers of attorney, or living wills. Remember, disasters strike with little or no warning-the time to prepare is now.

Article provided by Brad Seib - MetLife Financial Representatve

Money Planner Volume 19 - Number 1

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Copyright 2008, Metropolitan Life Insurance Company, New York, New York. MONEY PLANNER explores ideas and summarizes information to help you meet the challenges of the future. For advice and guidance on specific subjects, consult your financial service representative and/or your legal and tax advisor. Like most annuity contracts and insurance policies, MetLife policies and contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. For complete costs and details, see your MetLife representative. Metropolitan Life Insurance Company, New York, NY. Securities products offered by MetLife Securities, Inc. (memeber FINRA/SIPC). 200 Park Avenue, New York, NY 10166. Metropolitan Life Insurance Company and MetLife Securities, Inc. are affiliates. This document provides a very general overview of some types of retirement plans available. This overview does not take into account specific distribution rules for each type of plan. For specific information, please consult yor tax advisor. Neither MetLife nor its agents render tax, legal, or accounting advice for which you should consult with your legal or tax advisor. Date of first use: 01/08.