How To Prepare Financially for a Natural Disaster

John Wollwerth /

When you think about suffering a natural disaster like a flood, wildfire, tornado, earthquake or hurricane, you likely focus on your immediate survival, which makes sense. But what about your financial well-being?

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Six in 10 Americans believe there’s a good chance they will be directly impacted by a natural disaster in the next three to five years, but only 15% have taken steps to create a plan to protect their finances, according to an American Institute of CPAs survey conducted by The Harris Poll in the fall of 2019.

To help, here’s a game plan laid out for you, so you can begin protecting your financial future right now.

Build an Emergency Fund

“If you can manage to build up a year’s worth of expenses in your emergency fund, you’ll be in good shape to deal with the financial fallout of a potential natural disaster,” said John Li, co-founder and CTO of financial lending company Fig Loans. “Toss the cash into a high-yield savings account, so it’s easily accessible — the money might grow faster in a mutual fund or investment, but it’s not worth the risk for your emergency fund.

Building Wealth

“To start building an account with one year’s worth of expenses in it, automate your savings, funneling your cash into your emergency fund account on payday before you have a chance to spend it elsewhere. Get a spending app that rounds up every debit purchase you make to the nearest dollar and saves the extra for a considerable boost. Toss your income tax refund and any other cash windfalls into your emergency fund until it’s well-padded and you feel protected from the financial impact of the elements.”

Make Sure You Have the Right Type and Amount of Insurance Coverage

Li said to check your insurance coverage for earthquake or flood damage because these natural disasters often are not included in basic home insurance plans.

“Having adequate insurance coverage will be your recovery lifeline and without it, a disaster can not only destroy your home but (also) wipe you out financially as well,” advised Sean Scott, author of “The Red Guide to Recovery — Resource Handbook for Disaster Survivors” and “Secrets of the Insurance Game.”

Building Wealth

Here are Scott’s tips regarding insurance coverage:

Make Sure Personal Property Items Are Adequately Covered

“Before purchasing a policy, you should do an inventory of your personal property so you get enough coverage for the full replacement value of everything you own,” said Scott. “If you have expensive jewelry, furs, collectibles or artwork, you will need to have these types of items appraised and purchase separate endorsements or riders to cover them.”

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Consider Coverage for the Cost of a Complete Rebuild and any Compliance Upgrades

“For the dwelling portion of the policy, get a couple of quotes from local contractors of what it would cost to rebuild your home exactly the way it is if it was completely destroyed,” Scott said. “If you live in an older home, be sure to get ample coverage for building code upgrades. This coverage provides additional coverage to upgrade your home to comply with current building codes. Code upgrades may include stronger framing or seismic reinforcing, electrical wiring and service panels, plumbing, insulation, energy-efficient windows, etc. If your home is severely damaged or destroyed, your adjuster will estimate to repair the damages based on the home you had, not including any costs that your local building department may require to comply with current building ordinances.”

Building Wealth

Consider Coverage for Expenses Due to the Loss of Use of Your Home

“When a disaster strikes and your home becomes unlivable, you will need coverage for additional living expenses or loss of use. This coverage provides a limited amount to pay for temporary housing, hotel costs, boarding of pets and other expenses that may be necessary while your home is being rebuilt. If you don’t get adequate coverage, you could be faced with paying your mortgage and your rent out of your pocket, and this scenario has caused untold thousands of disaster survivors to lose their homes or go bankrupt.”

Understand the Limitations of a Homeowners Policy If You Run a Business From Home

“If you run a business out of your home, a typical homeowners policy will not cover any property, equipment, inventory or supplies used for business purposes. You will need to buy a separate policy that covers business-related losses or business interruption.”

Secure Paper and Digital Copies of Your Financial Documents

Not only should you have paper copies of all of your important documents in a secure, waterproof and fireproof location, including wills, birth and marriage certificates, deeds, all insurance policies, and banking and investment information, you should also secure digital copies.

“Gather your important information and put it safely in the cloud in a format that is easy and safe to use, like a digital vault,” said Mary Kate D’Souza, co-founder and chief legal officer of Gentreo, an online estate-planning solution. “Knowing who, what and where saves time and money in critical situations from bank or credit union account numbers to insurance contacts and policy numbers. Join a site that walks you through what account information and documents to save and lets you save that information. It will be much easier to go to your digital vault and access your account numbers than to have to call your broker later and try to pass security tests to prove you are who you say you are.”

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Supplies and Prep Steps in Case of a Natural Disaster

Once you’ve gotten your finances organized and ready for a worst-case scenario, here’s some advice about prepping and supplies.

Joshua M. Flatley, CFP(r), MBA and managing member of XVector, Ltd. recommended having the following on hand in case of a natural disaster.

  • “Cash is king,” he said. “Depending on the nature of the disaster, you may not have access to ATMs, banks or even grocery store cashiers.”
  • “A go-bag is essential,” Flatley recommended. “Include supplies to be able to survive without other resources for up to 72 hours (water, emergency blanket, snack bars, etc.).”

Flatley recommended making sure your vehicles are maintained and fueled and also having an escape plan in place that includes family member actions to be taken, escape routes, alternate routes and contact information for family and friends, so you can notify them of your status.

Here are some other supplies to have in case of emergency, according to

  • Flashlight
  • Battery-powered or hand-crank radio
  • Extra batteries
  • Cell phone with charger and an extra battery
  • Local maps
  • Whistle for signaling for help
  • Manual can opener to open canned goods
  • Personal wipes, hand sanitizer and trash bags
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Last updated: Oct. 15, 2021 

About the Author

Cynthia Measom is a personal finance writer and editor with over 12 years of collective experience. Her articles have been featured in MSN, Aol, Yahoo Finance, INSIDER, Houston Chronicle, The Seattle Times and The Network Journal. She attended the University of Texas at Austin and earned a Bachelor of Arts degree in English.

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