How to financially prepare for a natural disaster
Beth takes on a tricky new money question—and offers expert advice on how to resolve it and how to talk it over in constructive ways.
“I recently relocated to the Gulf Coast of Mississippi for work—and I love it. However, my new home is a mile from the sound in Hurricane Evacuation Zone B. Neighbors have told me about what Katrina did to their houses, and the devastating impact on their financial lives. Is there anything I can do now to prepare financially for a natural disaster?”
—Gene, Gulfport, Miss.
Everyone should save up for a rainy day, stashing away an emergency fund with enough money to cover three to six months of living expenses. But rainy days are one thing; hurricanes are something entirely different. Gene is right to worry. FEMA’s data visualization tool breaks down the number of federally declared disasters county by county, dating back to 1953. Harrison County, where Gene lives, has suffered 23 of these incidents over the years—including 15 hurricanes. Katrina alone wiped out 90% of the buildings along the Mississippi coastline.
It’s crucial for us to do what we can to help disaster victims. But as the climate gives us more frequent and violent weather events, it’s also important to help ourselves—by making sure we’re as prepared as we can be.
For advice, I reached out to the amazing folks at SBP (formerly known as the St. Bernard Project) for guidance. Born in New Orleans in the wake of Hurricane Katrina, the organization has rebuilt homes for more than 1,300 families across the country—from Missouri, after tornados flattened Joplin, to New York and New Jersey following Superstorm Sandy.
Autumn Lotze, senior resilience specialist at SBP, started by giving me a number: $33,000. That is the maximum amount a homeowner can receive from FEMA to rebuild after a federally declared disaster. And while that may sound like a lot, if the worst happens, it’s probably not nearly enough to put the pieces of your life back together. “That money was only ever designed to meet basic needs and get homes back to a safe, livable condition. Not a pre-disaster condition,” Lotze said. “It will never replace all that was lost.”
That’s why it’s critical to take your own financial measures, and well in advance. “In our training, we talk about financial preparedness in a multipronged way,” she said. “Ultimately, your best resource is you and the actions you’ve already taken.”
Here are the actions SBP recommends:
Have a stash of cash
Thanks to Venmo and the proliferation of plastic, maybe you haven’t touched actual paper money in years, but after a disaster, cash is king. “Have cash on hand to meet immediate needs,” Lotze explained. “ As an example, think of what your family cash needs would be if you had to evacuate and were on the road for a few days—such as a night or two in a hotel, filling up the gas tank twice, food, water and basic necessities during that time. In a disaster, ATMs and banks may not be available, so that emergency cash could be a lifesaver. Small bills are best. Start with what you can afford now, and build up your fund to what you think could sustain you and your family for a few days away from home.”
“Sufficient insurance coverage is really the best tool we have for financial preparedness when it comes to disasters and comprehensive recovery,” Lotze said. This means both homeowners/renters insurance and “peril-specific coverage”—such as flood insurance if you’re in a flood-prone area, or insurance against earthquakes or windstorms, if your area insures these things separately. (Most homeowners insurance policies don’t cover floods.)
Floods are shockingly common. Take Gene’s county. According to FEMA data, Harrison has suffered 40 flooding events in the past 20 years. Unfortunately, only 15% of American homeowners have insurance through the National Flood Insurance Plan. And it doesn’t take Harvey-scale flooding to do a lot of costly damage.
“FEMA estimates that an inch of flood water can cause more than $10,000 in damages in an average 1,000 square foot home,” Lotze said. “Homeowners without insurance are forced to find ways to cover that through a combination of their own pockets and aid programs, which may not be available for every flood event.”
And just because you don’t live in a hurricane evacuation zone like Gene does, that doesn’t mean you shouldn’t be prepared.
“We are seeing severe flooding more and more in areas that have never previously flooded,” Lotze said. “More than 20% of all flood insurance claims come from outside mapped high-risk areas. So the risk isn’t just limited to those on the coast or the bank of a river.”
Protect your important financial documents
“Ideally this means protecting your hard-copy originals from fire and water at home,” said Lotze, “and also having copies that you can access even if you can’t get home. Secure online cloud storage is a great option. You might consider safety deposit boxes, but remember, banks aren’t always accessible in a disaster and they can flood, too.”
Ready to put your financial disaster preparedness plan in action? Before you do, let me add one final step:
One of the most meaningful things you can do to protect yourself, your community, and others is to support organizations like SBP that are doing so much to put families’ lives and homes back together—and teaching us how to be ready for the next natural disaster. Here’s how you can help their efforts.