USAA Tips: How to prepare your finances for a natural disaster

Content provided courtesy of USAA

Floods, fires and other natural disasters can destroy everything in their path, but they shouldn't devastate your finances. JJ Montanaro, a certified financial planner with USAA, offers five steps you can take now to help be more prepared if a disaster strikes.

Build an emergency fund.

Everyone should have an emergency fund, but it's critical during a crisis. Save at least three to six months of your ongoing expenses in a secure place that you can access easily, such as a savings account. Withdraw cash if a natural disaster heads your way, and remember to save your receipts for any disaster-related cash purchases, because your insurance company may reimburse some of your expenses.

Review your insurance policy coverage.

Evaluate your policies regularly and note their dollar limits, what they cover and the deductibles you would have to pay if you filed a claim. You should insure your home for at least the minimum estimated replacement cost recommended by your carrier.

Check for insurance gaps.

After a disaster strikes is the worst time to learn you don't have enough insurance or the right type of coverage. For example, most homeowners insurance doesn't cover flood damage or lost belongings and may have limits on certain high-value property that could leave you at risk. Consider buying separate flood insurance, earthquake insurance and valuable personal property insurance policies to meet your additional needs. Your insurance provider also should be able to help assess your property risks because if homeowners insurance does not cover flood-related losses, your automobile and renters insurance could. If you rent an apartment or home, a renters policy will help replace personal belongings damaged or lost in a disaster and can provide temporary housing while your rental unit is repaired.

Take inventory of your belongings.

Most people would struggle to come up with an accurate list of everything they own from memory, making the insurance claim process difficult. Start with a written inventory and supplement with a video tour of your home. Store the inventory away from your house — such as a safe-deposit box at a local bank — or online through mobile home inventory apps. Update the inventory at least once a year or whenever you make a major purchase.

Use online money-management tools.

The last thing you need during a disaster is to lose access to your cash. Sign up for a savings account that enables automatic payment plans to pay bills on time and direct deposit of your paycheck, pensions and any other income to keep the cash flowing in. Utilize budgeting and financial planning tools to keep track of your finances and insure that you aren't racking up late fees on payments or damaging your credit score.