Hurricane Dorian spared South Florida this time; however, the threat of a potential hit had many stocking up on supplies such as food, water, batteries, gas and other hurricane-preparation items. Some even boarded up their homes and businesses. Unfortunately, our neighbors in the Bahamas were not so lucky; the overwhelming devastation to the Islands has left many of us rethinking our disaster preparedness plans.
With three more months left of hurricane season, now is not the time let your guard down: NOAA forecasters increased the likelihood of an above-normal Atlantic hurricane season to 45 percent (up from 30 percent from the outlook issued in May).
While many of us know to stock up on the typical hurricane supplies, ensuring our finances are well-organized and protected is not always top of mind during this hectic time.
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 5 financial crisis in the event of an emergency such as a hurricane.
▪ Establish an emergency fund: With any emergency comes additional unexpected expenses, and 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 or having to incur short-term capital gains, which are taxed at your ordinary income tax rate.
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: Before a hurricane hits, make sure you understand what is covered under your homeowner’s policy as well as any automobile, boat, business or renters insurances. Make sure they are up-to-date and check for any potential lapses. Hurricane deductibles are based on a percentage of the home’s insured value. According to Zillow.com, the median home value in Miami is $336,000 as of July 31, 2019. If you have coverage for that amount and have a 5 percent hurricane deductible, that translates into a $16,800 deductible. Keep in mind that flood is not covered under your homeowner’s policy.
In addition to flood insurance, it is advisable to consider a comprehensive umbrella policy. This is particularly true for affluent high-net-worth families, where there may be additional liability exposure. As this insurance is above and beyond your existing insurance, it may be a more cost-effective solution than you might expect.
▪ Protect your documents: As we become more technologically advanced, it’s important to keep a digital backup of all important documents and a printed copy in a secure, fire and waterproof-safe container. Important documents include copies of IDs, Social Security cards, birth certificates, passports, insurance policies, mortgage deeds, car titles, estate plans, healthcare proxy and durable power of attorney, among others. These documents will help you verify your identity and ownership of assets in the event necessary.
▪ Protect your business: Businesses are an integral part of the economy and community of South Florida. Ensuring a rapid recovery after a storm helps not only support the business but also its employees, the community and local economy. Early planning is essential for preparation and this includes having a continuity plan for your business, which incorporates information about your employees, assets, vendors, and suppliers. Review your business insurance policies including any business interruption or business income coverage policies and limits. The Federal Emergency Management Agency (FEMA) website offers several useful checklist surveys and tool kits on hurricane preparedness and plans for your business. 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 minimizing any loss of income or sales. Your city and community will thank you for it.
Financial preparedness is an essential part of hurricane season planning and a comprehensive financial plan should provide a road map for unforeseen events that establishes a dollar amount for your emergency fund, assesses the need for extra insurance protection, and lays the groundwork for a business-continuity plan.
A few simple steps can help prevent financial headaches. Take the time now to prepare before you get caught up in the storm!
Eileen Santana is senior vice president at Coral Gables Trust Company, an independent and privately held trust company and a provider of wealth management, trust, and financial planning services throughout the state. Santana, a certfified financial planner, has a bachelor’s and master’s in business from the University of Miami. She can be reached at 786-498-1212 or firstname.lastname@example.org.
▪ This opinion column was written for the ‘My View’ space in Business Monday of the Miami Herald. It does not necessarily reflect the views of the newspaper.
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