Disaster Proof Finances

This year delivered epic natural disasters galore. Yet many people still haven’t taken a few critical steps to protect their financial lives from such disasters.

Take care of these three essential tasks:

Get more insurance

Most renters don’t have renters insurance, but they need it since their landlord’s policy won’t cover their stuff.

The vast majority of homeowners do have homeowners insurance, but often not enough — especially if their policies haven’t been updated regularly to reflect rising construction costs or improvements. Ask your insurer to rerun the numbers to ensure you have enough coverage to rebuild your home completely.

United Policyholders, an advocacy group for insurance customers, recommends adding as much “extended replacement cost” coverage as you can afford. This add-on boosts the policy’s coverage limits by 20 percent to 100 percent if costs run unexpectedly high, as often happens in disaster zones when rebuilding costs soar.

Other key points:

• Homeowners insurance typically doesn’t cover floods or earthquakes, so consider buying those policies if your home may be at risk.
• You want “replacement cost ” coverage for your home’s contents, not “actual cash value,” which will pay only pennies on the dollar to replace your stuff.
• You may need extra coverage if you have certain valuables, such as jewelry, collectibles, guns or computers and other home office equipment. Policies typically limit coverage to $1,500 to $2,500 for each of these categories.
• Opt for generous “loss of use” or “additional living expenses” coverage, since that will pay your rent and other costs while your home is uninhabitable. United Policyholders recommends having at least two years’ worth of additional living expense coverage.

Save documents to the cloud

You may be away from home or not have time to grab your bug-out bag in your scramble out the door. Keeping documents or copies off-site is one solution, but anything in your safe deposit box or lawyer’s office could be compromised by the same disaster that wrecks your home.

“You don’t want important documents to be at risk of burning up or being destroyed,” says Joe Garza, head of Garza Harris. Services available are DropBox, a file sharing and storage site, for family pictures and Box, a similar site known for its security features, for financial documents. Other cloud services include Microsoft’s OneDrive, Apple’s iCloud and Google Drive.

Disaster survivors say the following documents can be particularly important, according to United Policyholders:

• Insurance policies
• Passports and birth certificates
• Family photos
• Tax and loan documents
• Stocks and bonds
• Wills and trusts
• Home blueprints or surveys

Get emergency access to your passwords

Security experts recommend using a password manager to securely store unique, hard-to-remember logins for each account while only having to remember one master password. Password managers also can help a trusted person to take over for you if you die or become incapacitated — but that person needs access to the account. Some password managers let you offer emergency access to others. Another option is to keep copies of your passwords, or your master password, with your estate planning documents. Services such as Everplans and Fidelity Investments’ FidSafe offer online storage with secure sharing options.

Finally, make a note on your calendar to do all this again next year so all your important documents are kept up to date. Investing a few hours each year can pay off in an easier recovery if disaster ever strikes, and peace of mind even if it doesn’t.