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 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.
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