Monday, December 28, 2009, 12:09AM ET - U.S. Markets open in 9 hours and 21 minutes.

Laura Rowley Money & Happiness

Laura Rowley, Money & Happiness

Flirting with Disaster: Preparation Is Key for Potential Catastrophes

by Laura Rowley

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story
Very Good (105 Ratings)
3.476186/5
Posted on Tuesday, August 26, 2008, 12:00AM

A tornado touched down in my brother's town this month. It didn't affect his home -- because most of it had already burned down over the Fourth of July holiday.

He and his family were away that weekend, and believe stray fireworks landed in the bushes next to the house. Thankfully, no one was injured. One of the firefighters, in the midst of battling the blaze, even had the presence of mind to grab an envelope labeled "graduation money" that my niece had taped to her bedroom wall. (Her high school graduation party was the previous weekend, and she hadn't made it to the bank yet.)

But everything else melted, and they have to recreate a list of their possessions mostly from memory.

Prepare for the Worst

With wildfires becoming more destructive in recent years, the 2008 tornado season one of the deadliest on record, and this year's Atlantic hurricane season forecast to be more active than usual, it's smart to ask "what if?" and protect yourself.

Preparing for disaster is one of those things -- like eating five servings of vegetables a day -- that people know they should do, but often don't. A recent study by the National Association of Insurance Commissioners (NAIC) found nearly half of Americans don't have enough insurance to deal with potential losses, and half have never taken an inventory of their possessions.

Focus on safety, a plan for communicating with family members, and accessing valuable documents in the event of disaster, suggests Tom Hazelwood, head of the disaster response program for the United Methodist Church for the U.S., Latin America and the Caribbean for last decade. He has provided assistance to victims of the Sept. 11, 2001, attacks, Hurricane Katrina, and California wildfires.

"Mostly the thing I see is the pure lack of planning -- people feel secure in their homes and think that it will never happen to them, and then it does," Hazelwood says. "Most people don't take the time to think through their vulnerabilities. Could your home get hit by a tornado or hurricane? Are you vulnerable to fire, flooding, or an earthquake? Every family should think through the possible events that could happen to them where they live."

Blown Away

Betsy Piette, a pastor in Parkersburg, Iowa, had contemplated those events, and it saved her life in May. She was trying to decide whether to attend a graduation party when tornado sirens went off. She climbed into the tub in a basement bathroom with a sleeping bag and pillows.

"I could hear the roar coming closer and closer -- and I started to hear things popping like transformers and trees," she says. "As it got overhead it was very loud, and I knew the house was going." The tornado took everything but the exterior walls, a wall of kitchen cupboards, a closet, and the bathroom where she rode out the storm.

Seven people died in the strongest tornado to hit Iowa in 30 years, and hundreds more lost everything they owned. "There were people with cash, savings bonds, and valuable coin collections in their homes," says Piette. "I heard someone say, ‘This [collection] was what I was going to retire on -- and it's gone.'"

Keep It Safe

Store originals of your most important documents in a safe deposit box, a basement safe that can withstand temperatures up to 1,700 degrees, or on a portable memory storage device. Hazelwood uses an external thumb drive that's password-protected, where he has recorded all of his financial account numbers and passwords, and stored scanned copies of his critical documents.

"I keep one thumb drive in my office, and one in my backpack. After a disaster you just have to find a computer anywhere that's working and you have all those documents with you," he says. "The recovery process is much faster for people who have those documents. If you don't, you're talking about months to get through that process."

Also make an inventory of your belongings, taking photographs of each room, and noting the model and serial numbers of the items. If possible, save receipts or canceled checks to prove the value of items in your inventory. (Remember to include seasonal items stored in the attic, basement, or garage, such as holiday decorations, tools, and sporting equipment.)

Store a copy of the data with a relative, in a safe deposit box, or online. Companies such as My Online Home Inventory allow you to upload the photos and descriptions in a secure file for an annual fee of $50. (The file should include a list of the 24-hour contact numbers for your insurer.)

Fully Covered

Meanwhile, make sure you have a replacement insurance that covers the real cost of replacing your home, rather than an "actual cash value," which covers your belongings after depreciation (i.e., if you have a 12-year-old television, you'll get an amount equal to the value of a 12-year-old television).

The NAIC survey found 43 percent of U.S. adults have replacement policies; 27 percent insured their homes for actual cash value; and 28 percent didn't know what type of policy they had.

Even if you do have replacement coverage, insurers have been narrowing the definition of "replacement," leaving some homeowners with inadequate coverage. To make sure you're covered, go to AccuCoverage, enter information about your home, and the site will provide the estimated cost of replacement. Compare this to the amount of coverage in Part A of your policy.

The California Experiment

In his book "High Wire: The Precarious Financial Lives of American Families," Peter Gosselin reports on California insurers who were low-balling quotes to get market share, with disastrous results.

"California is a natural laboratory, because we have wildfires that sweep in and take out a whole bunch of houses at once," Gosselin explains. "You can tell if it's a one-off thing or a pattern. When the Oakland Hills fires sweep in and wipe out all the houses in an area and you see that virtually everyone is underinsured, then you have a pretty good idea something is wrong."

Gosselin interviewed homeowners who had asked their insurance agents if their replacement coverage was too low only to be told the value was in the land, not in the house. "People who had gone to the trouble of making sure they were insured ended up with a huge hole in their finances that they didn't think was there," he says.

The Devil Is in the Details

In addition to proper replacement coverage, verify whether you need extra coverage for fires, earthquakes, or other special-situation losses, and check if your policy covers damage from flooding, wind, and hail (many don't).

Also consider a policy that covers your living expenses while your home is rebuilt. Finally, be sure to contact your insurance agent to update your policy if you do renovations or improvements.

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story

Rate This story

Very Good (105 Ratings)
3.5/5
Sign-in to rate!

30 Comments

Showing comments 6-30 of 30<< Previous
Sort: first to last

  • Yahoo! Finance User - Friday, August 29, 2008, 4:41PM ET  Report Abuse

    • Overall: 1/5

    netsystems wrote: "Of all the writers, you and Wheelan are my favorites."......OMG! you ARE easily entertained by soccer Moms and socialists aren't you?

  • pbergn - Friday, August 29, 2008, 3:00PM ET  Report Abuse

    • Overall: 1/5

    What is this obsession with disasters and "End of the World"?! Wher does this come from? Why should we waste time in thinking about such calamities if we cannot help them anyway? And besides, what does this have to do with Financial topic this blog is assumed to belong to?! What is going on?! Did I tune in to a wrong bandwidth here? Please give us some sound Finanical Advice, and not how to be prepared when disaster hits!!!!!!!!!!!!!!!!!!!!!

  • "Jackson Cash" - Friday, August 29, 2008, 1:31PM ET  Report Abuse

    • Overall: 2/5

    Thank you for the attention on this matter. The old boy scout motto always seems to ring loud and clear: "BE PREPARED". I would also emphasize that when using technology, prepare for it too to fail.. Those with "thumb drives" that have critical data, be very careful that they don't fall into the wrong hands. Also, if you make big purchases by credit card (pay off balance each month) you have detailed documentation of big purchases- already securely stored. Make home movie of possessions and be sure to commentate -- read serial numbers/model numbers out loud, pay special attention to firearms, not just TV's.

  • RobertM - Friday, August 29, 2008, 12:50PM ET  Report Abuse

    • Overall: 3/5

    I only give a good on this one because of the over emphasis on insurance. The insurance industry in this country has done a great job in getting people over insured to their financial detriment. There is no free money and the real cost of insurance is huge (ratio of premiums to dollar value of the coverage). Insurance should only cover risks that are too severe for you personally accept. Using Laura's example, it is foolish to pay for replacement insurance for a 12 year old TV and other old appliances. You are better off banking the permium money and taking the risk that you would have to buy a new one out of your pocket. (I donlt want to even get started with the life insurance scam). The rest is common sense.

  • Yahoo! Finance User - Friday, August 29, 2008, 11:59AM ET  Report Abuse

    • Overall: 4/5

    She makes some great points. I recently purchased a copy of "Everyone Needs This Book" from everyoneneedsthisbook.com which has all of the important information compiled in one place. It is good for a catastrophe like the ones listed, but also includes information my wife will need if something happens to me.

  • XX - Friday, August 29, 2008, 10:24AM ET  Report Abuse

    • Overall: 5/5

    Of all the writers, you and Wheelan are my favorites.

  • Yahoo! Finance User - Friday, August 29, 2008, 8:22AM ET  Report Abuse

    • Overall: 4/5

    I keep some important information 'coded' in my Yahoo Mail account. I store the numbers multiplied by a password number, based on family birthdays, so I'll remember it. The password protected flashdrive is a good idea if kept in a safe place, but a simple numerical code on the info would make it safer if lost.

  • Yahoo! Finance User - Thursday, August 28, 2008, 9:42PM ET  Report Abuse

    • Overall: 5/5

    Down to earth common sense, even about something many people prefer not to think about. Thanks for reminding us, Laura.

  • AlwaysCorrect - Thursday, August 28, 2008, 4:39PM ET  Report Abuse

    • Overall: 5/5

    People that are blasting this article for being in a personal finance area are absolute financial dolts. Congrats. The article was well structured and a good reminder that finance is all about management of risk. If only a few of the readers would take a second to glance at something other than their gold prices collapsing, they would be happier.

  • Baby boomer - Thursday, August 28, 2008, 3:41PM ET  Report Abuse

    • Overall: 4/5

    I keep my house insurance policy at the office and it would take a nuclear blast to destroy both house & office. Copies of passports, credit card details and medical insurance etc are scanned and emailed to my yahoo account so that if they get lost while travelling overseas, I can go to any internet cafe and recovery the info. Just some little things to do to protect yourself by thinking ahead.

  • dtifft - Thursday, August 28, 2008, 3:31PM ET  Report Abuse

    • Overall: 1/5

    If I wanted to read about disasters, then I would have looked up the Red Cross, rather than Yahoo's personal finance section.

  • A Publius in training - Thursday, August 28, 2008, 1:29PM ET  Report Abuse

    • Overall: 1/5

    Maybe this is why we still need the Boy Scouts.. be prepared.. for the worst. What is with all this online database stuff. Just what I need, to give a hacker a full inventory so they can decide if I'm worth robbing. Paper, a thumb drive or two, and a good safe works for me.

  • Yahoo! Finance User - Thursday, August 28, 2008, 1:07PM ET  Report Abuse

    • Overall: 1/5

    Gee, preparation is the key???? DUH!!!!!! Why oh why does Yahoo not screen these articles??? Can't, can't we all get some writers to write something we need to know???

  • Yahoo! Finance User - Thursday, August 28, 2008, 11:41AM ET  Report Abuse

    • Overall: 3/5

    Laura did not include family pets in her preparation advice. mypetsoft.com helps you manage important pet information in an online database.

  • John - Thursday, August 28, 2008, 11:35AM ET  Report Abuse

    • Overall: 3/5

    Much of this is insurance industry propaganda. Most people are OVER-insured. They figure, hey my house is worth $400,000 so that's what I need for insurance. Truth is, the company is only going to pay you to rebuild the house, which is maybe $300,000 and the land may be worth the other $100,000. So you are paying for coverage that you will never get. Also, vast majority of cases are not total losses. Besides, if you end up with a BRAND NEW HOUSE, then why shouldn't that cost you something? After all, you were living in an old house before the disaster, and now you get everything new and clean, and get to pick your colors and carpeting, and kitchen style, etc. so why is it so important to get out of paying anything? When you pay for "replacement coverage" you end up paying tens of thousands of dollars over several years.

  • penurius - Thursday, August 28, 2008, 10:27AM ET  Report Abuse

    • Overall: 5/5

    The Flash drive is a great idea for keeping inventory lists, pictures and copies of deeds and papers, you can keep a copy at work or some other place away from the house. Also know your risk. You can spend some time with an elevation map or even Google Earth and figure your risk for local flooding, don't buy expensive insurance you don't need. And don't build or buy a house in a flood prone area, you will pay thousands for extra flood coverage. Masonry construction, metal studs in interior walls instead of wood, and a metal roof can reduce your chance of fire to near negligible. Better to reduce risk rather than try to take on extra insurance coverage that is very expensive, the insurer will likely use some loophole to pay far less than the coverage you thought you had.

  • Yahoo! Finance User - Thursday, August 28, 2008, 10:14AM ET  Report Abuse

    • Overall: 1/5

    Her niece sounds like a spoiled brat.

  • Yahoo! Finance User - Thursday, August 28, 2008, 9:23AM ET  Report Abuse

    • Overall: 1/5

    I'm going to get some potassium iodine tablets too. But I kinda don't see the point. If something really bad happens

  • Chris - Thursday, August 28, 2008, 9:21AM ET  Report Abuse

    • Overall: 5/5

    Great article that covers the basics in a country where everyone thinks nothing will ever happen to them. most people in this hate insurance and complain constantly about how much they have to pay for, but man are they happy when they have a claim. Face it people life is uncertain and pay well for your insurance because you get what you pay for.

  • SandyLady - Thursday, August 28, 2008, 6:48AM ET  Report Abuse

    • Overall: 5/5

    I live in FL, and even though I am a Florida native (having lived thru countless hurricanes) when we got zapped with 4 storms back to back, NOBODY was prepared....I lost two 60ft trees in my yard, completely uprooted....power down for a week...roofs off, water everywhere. Point being, be prepared as best you can, but sometimes nature does what it will do, and don't be overly fearful (or over insured; the insurance company will only cover a percentage of your loss no matter how good your policy is). Particularly water damage; unless you have a separate flood insurance policy (and forget the "flood plain" charts and graphs, if you have water damage from a storm or act of nature, the insurance company will NOT cover that damage, PERIOD. Lesson learned by many homeowners here in Florida).

  • Robin - Thursday, August 28, 2008, 3:04AM ET  Report Abuse

    • Overall: 5/5

    Great finance advice to prepare for BEFORE an emergency. Not sure if the previous posters read your article.....as usual!

  • USA P - Thursday, August 28, 2008, 2:50AM ET  Report Abuse

    • Overall: 2/5

    Im a small business owner. Earthquake insurance here in Cali is unbelievably high...I simply can't afford it. Do insurance companies know something I don't? My suggestion would be NOT to be DEPENDANT on insurance companies nor government-THEY ARE ALL CROOKS. Instead, invest in storable foods, a generator, camping gear, etc. It's more reliable, cheaper, and you will depend on NOBODY! I used to sell all kinds of insurance...IT'S ALL A RIP OFF! And I should haven't to tell you the government is EQUALLY unreliable. I hope all of you reading this TRULY understands that these entities DO NOT CARE ABOUT YOU!!!! THEY ARE ALL TRYING TO RIP YOU OFF IN THE NAME OF SAFETY. Fear is a powerful human emotion...they've been using on the people in every aspect of our lives. Do not fall for it. Gave the writer a fair...she forgot to mention the having cash on hand is CRITICAL. Ultimately, if you lose your home...don't worry about too much. It wasn't yours in the first place. If you have a lien on your property, it belongs to the bank. If don't you're just leasing from the gov't (see what happens when you don't pay your property taxes). PROPERTY rights DO NOT exist here in America...you just lease it. Why because international private banks, mostly from European families, have hijacked America with the Federal Reserve Bank-LOOK IT UP AND STOP BEING IDIOTS!

  • Yahoo! Finance User - Thursday, August 28, 2008, 1:00AM ET  Report Abuse

    • Overall: 3/5

    Will you ask Anna if these events will affect FICO scores?

  • itisme - Thursday, August 28, 2008, 12:57AM ET  Report Abuse

    • Overall: 1/5

    and what about meteors and alians....are they illegal when they come from another planet?

  • Irving - Thursday, August 28, 2008, 12:44AM ET  Report Abuse

    • Overall: 1/5

    This is a Finance site, but thanks for the handy tips.

Showing comments 6-30 of 30<< Previous
The columns, articles, message board posts and any other features provided on Yahoo! Finance are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Yahoo! and there is no implied endorsement by Yahoo! of any advice or trading strategy.

More From Laura Rowley

Money & Happiness

Discover the secrets to financial happiness. Laura's book offers practical tools and positive strategies to create "the good life" in a meaningful way.

More about Money & Happiness

Learn to identify your values, banish debt, start saving, and investing; plus Laura's favorite online resources.

Order your copy of Money & Happiness today and boost your financial well-being!

More from Yahoo! Sources

  • CNN Money
  • Consumer Reports
  • Kiplinger
  • The Motley Fool
  • Business Week
  • Wall Street Journal

Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data and daily updates provided by Morningstar, Inc. Fundamental company data provided by Capital IQ. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.

Yahoo! Answers is provided for informational purposes only, and no Q&A is intended for trading or investing purposes. Yahoo! shall not be responsible or liable for the accuracy, usefulness or availability of any Q&A information, and shall not be responsible or liable for any trading or investment decisions based on such information. View Complete Answers Disclaimer.