This week we’ve invited Eileen Santana, our Sr. VP and Sr. Relationship Manager, at Coral Gables Trust Company to advise us on how to avoid a category five financial crisis when a storm hits.
With hurricane season upon us and the aftermath of Hurricane Irma still fresh in our minds, now is the time to start your disaster preparedness. Forecasters are predicting another busy season this year and as South Floridians, most of us know to stock up on food, water, batteries, gas and other hurricane preparation items. But ensuring that our finances are well-organized and protected is not always top of mind.
Do you have an emergency fund in place? Do you have adequate insurance on your home and businesses? Are your documents protected? The following tips are critical to avoiding a category five financial crisis in the event of an emergency such as a hurricane.
Establish an emergency fund: With any emergency comes additional unexpected expenses. Having an emergency fund in place can ensure you don’t have to sell securities or assets at an inopportune time, like when the market is bearish, and having to incur short-term capital gains taxes.
An emergency fund consists of a savings account with enough funds to cover the cost of hurricane supplies, evacuation costs such as hotels and gas, home repairs (while you wait for insurance reimbursement), cash in the event of a power outage (as ATMs and banks will not be accessible), and a credit card designated for emergency use only.
Review your insurance coverage: Make sure you understand what is covered under your homeowner’s policy as well as any automobile, boat, business, or renter's insurances. Make sure they haven't lapsed. And remember that Hurricane deductibles are based on a percentage of the home’s insured value. If you have a coverage for $766,000 for example (Zillow's median value for a home in Coral Gables) and have a 5 percent hurricane deductible, that translates into a $38,300 deductible. Also keep in mind that flooding is not covered under your homeowner’s policy and that you may want to consider a comprehensive umbrella policy if you are a high networth family with additional liability exposure.
Protect your documents: It's important to keep a digital backup of all important documents and a printed copy in a secure, fire and water-proof container. Important documents include copies of ID's, social security cards, birth certificates, passports, insurance policies, mortgage deeds, car titles, estate plans, health care proxy and durable power of attorney, among others. These documents will help you verify your identity and ownership of assets if necessary.
Protect your business: Ensure you have a continuity plan for your business that will include information about your employees, vendors and suppliers. A well drafted continuity plan for disaster recovery will not only keep you, your staff and customers safe, it will also help you and your business recover promptly and minimize any loss of income or sales. Your city and community will thank you for it.
Financial preparedness is an essential part of hurricane season and a comprehensive financial plan should always provide for unforeseen events. A few simple steps now can help prevent financial headaches later.