Are you prepared for the unexpected? This past week saw unusual weather hit the East coast and devastate the Jersey shore. Too many people’s homes and businesses are devastated and will take a long time to rebuild. Natural disasters like hurricanes, tornadoes, floods and earthquakes destroy property and take an emotional toll on everyone involved!
Everyone knows someone who was affected by hurricane Sandy. If you don’t, you may remember visiting a location that was affected by the storm. It was so large and affected such a large area. I grew up on the East coast (New York City and New Jersey) and remember many of the hardest hit areas. I have relatives who still live in some of those areas as well. It also reminds me of the devastation of the Northridge earthquake because my former home was in Northridge.
Disasters remind you that you cannot control everything! “It’s not what happens to you, but how you react to it that matters”. (Epictetus) You could wait until a disaster occurs and react to it or prepare for disasters before they happen. If you live in a hurricane, tornado, flood or earthquake prone area, you need to prepare it! The first step is buying sufficient insurance or checking your coverage. I am surprised that banks do not require insurance for these disasters.
If you do not have insurance, you may not be able to rebuild. Natural disasters usually bring out federal aid in the form of low interest loans. If you have a mortgage, you will have to make payments whether you rebuild or not. A better approach is to plan ahead for disasters! Some people have savings for those unplanned expenses that come up in most people’s lives. Businesses plan for unexpected events all the time. Shouldn’t you? What would you do, if your home were destroyed?
I live in the epicenter of earthquake activity in southern California. Since I know firsthand what an earthquake can do, I have earthquake insurance. For just a few hundred dollars a year, I am covered for a severe disaster. Of course I have a deductible, but I capped my losses and I can rebuild my home. In addition, I have savings to help me with the deductible. I planned for disasters although I have only seen one devastating earthquake in forty (40) years. I plan for the unexpected! Fail to plan or plan to fail!
Hurricanes, floods, tornadoes occur much more frequently. Hurricane Sandy is a once in a century kind of tragedy, but it can happen. We all (should) have automobile or fire insurance, although the probability of you personally having one is small. If it happens, it can be life changing! Whether your home is worth $100K or $1MM, you cannot rebuild without insurance. Most, if not all of us, take out a mortgage to buy a home. If you paid off your home, you do not want to have a loan again.
Why do you have insurance? You need insurance for protection against financial loss. You want to protect yourself from financial loss from a car accident, your home from a variety of disasters or your family in the event of unexpected serious illness. You need insurance because you cannot predict disasters, but you can prepare for them. Having an emergency instant access savings account is another way to protect you against financial loss. It will help you with the deductible and lessen the impact of a disaster.
Final Thoughts
Planning for the unknown is difficult because you have to put aside money in savings accounts or buy insurance for an event that may not happen. Making a conscious decision to deny you something tangible now for something that may not happen is very difficult. The consequences of a disaster can be far worse financially. Loss of home or a serious illness could change your life. At the very least, you can have some insurance with a high deductible rather than none at all. Are you prepared for the unexpected?
Photo by: NASA Goddard
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The sad part of planning I saw as a financial advisor was that people who could least afford a high deductible were the ones who had one…. Reason? It was cheaper. Sadly, when things when wrong (and they always do, right?), they didn’t have the cash to pay their portion.
Some may say it is a calculated risk! People react to financial risks differently. I increase my deductibles to save some money, but realize I need the cash if there is a loss.
Hailstorms, ice storms, tornadoes… such is life in the Southwest. We’re well-insured, both on paper and in real physical terms.
Living in earthquake country, I know it may only occur once in the next 30 years. I just don’t know when.
I think you really never know what’s going to happen. You can try your hardest to be prepared but as many seem to find out the unlikely is what is likely to happen, so you just have to do your best to have things in order. I know we keep a lot of things electronically so even if our house was destroyed, we would have access to most financial data as long as we could get an internet connection somewhere.
When I went through the Northridge earthquake, I was surprised how long it took to restore electricity and (clean) water. The funny thing is financial loss is not even an issue for these 2 issues.
There’s a show on National Geographic called Doomsday Preppers. It is a little extreme in most cases but I will say better safe than sorry.
I am a planner by nature. I do not like surprises, so I prepare for unexpected things. Whether it is insurance or taking an extra shirt on a trip.
Yes; the answer is insurance. We have different kinds but one thing I am planning to look at is whether we may be over-insured. We shouldn’t forget though that wacky stuff happens: last year in the big freeze over in Europe, a man went to Sofia (capital of Bulgaria) for business. Whilst walking to the office an icicle fell on his head and killed him instanteniously. What could you do about this one (apart from having life insurance, of course)?
In the U.S., we have accident insurance and double or triple indemnity for certain kinds of accidents. There are lots of unpredictable or unexpected things that can happen. BTW, I would avoid walking in an area where things can fall on you.
Now, I would say that there are some things that can happen that are truly unexpected. Many of those things can come out of left field, and we really aren’t going to be spending time preparing for them.
That being said, I think that many other things actually ARE predictable, or at the least we can attribute odds to such things happening. Even if the odds are slim, things can happen. For example, building a home on the edge of a floodplain, people can’t be surprised if a so-called once a century flood comes in. Another example – thinking that their job is secure, and that the macro business climate won’t change.
Bottom line is that we should do our best to expect the unexpected, be aware of pitfalls, and also be honest with ourselves about the possible risks in different situations.
Are you saying Murphy’s law is alive and well? I live in earthquake country and they predict that there will be a big one in the next 30 years. For a few hundred dollars, I can protect my “large” investment! My home (structure) is covered through my HOA and the deductible is covered through loss assessment coverage. I have a 10% deductible which protects me in case there is a catastrophe. The prediction is so vague, but I cannot afford to risk my home for a few hundred dollars a year.
Insurance, saving, investing, buying emergency supplies!!!
Preparation is the key for disasters! Particularly the ones you cannot predict when they will occur.
We have insurance and an ER fund so we should be good for whatever hits. I couldn’t imagine not being prepared for the unknown. I would feel so stressed.
I think that is true for many people, but there are many more who seem to go without savings or insurance.
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