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Fires, Floods and Other Misfortunes: Are You Prepared Financially?
Disasters can impair your ability to conduct day-to-day money matters. This guide can help you plan appropriately.
While Hurricane Katrina was the dominant disaster story in the U.S. in 2005, other calamities such as floods, fires, earthquakes, tornadoes, hurricanes or similar events occur frequently, forcing people to evacuate their homes. Minor disasters also damage or destroy property or personal belongings. Just ask anyone whose has had a water pipe burst at home, turning their storage or living space into a wading pool. So why is the FDIC — a banking regulator — telling you about floods and fires?
Because natural or man-made disasters strike without warning and can happen to anyone. They can also seriously impair victims' ability to conduct essential financial transactions.
Certainly, your first concerns in an emergency should be your safety and basic needs such as shelter, food and water. But you also should be ready to deal with financial challenges, such as how to pay for supplies or temporary housing, if necessary.
"Being prepared to function financially if you have to leave your home at a moment's notice will give you less to worry about if an unfortunate event happens to you," said Janet Kincaid, FDIC Senior Consumer Affairs Officer.
What about you? If you had only a few moments to evacuate your home — and were away for several days or even weeks — would you have access to cash, banking services and the personal identification you need to conduct your day-to-day financial life? Here are some tips from the FDIC, based in part on our recent experience staffing a 24-hour call center to respond to banking-related questions from victims of Hurricanes Katrina and Rita.
What to Have Ready
Consider keeping the following documents, bank products and other items in a secure place and readily available in an emergency. (For guidance on how and where to keep originals and copies of selected items, keep reading.)
Forms of identification: These primarily include driver's licenses (or state ID cards for non-drivers), insurance cards, Social Security cards, passports, and birth certificates. These documents will be crucial if you or your family should need to rebuild lost records or otherwise prove to a government agency, a bank or other business that you are who you claim to be. "It's best to have the originals, but it's also important to have photocopies of these documents in case originals are misplaced or destroyed," said Kincaid. "Also, never keep the originals with the copies."
Your checkbook with enough blank checks and deposit slips to last a month or so: Your need for checks will vary depending on how long you may be displaced or how often you write checks. Even if you rarely or never write checks, at least consider having a copy of a check or your checking account number handy. That's because, in an emergency, you can authorize an important payment by providing the recipient (for example, an insurance company) your checking account number over the phone.
Automated teller machine cards, debit cards (for use at ATMs and merchants) and credit cards: These cards give you access to cash and the ability to make payments on outstanding bills. Most ATM and debit cards require the use of personal identification numbers (PINs), so make sure you know those numbers. Don't write your PINs on or near your cards in case they are lost or stolen. Also, don't assume that merchants and ATMs in areas affected by a disaster will be immediately functioning as usual — that's why it's smart to have other options available for getting cash and making payments, as described in this article.
Cash: The amount you should have available will depend on several factors, including the number of people in your family and your ability to use ATM, debit and credit cards to get more cash or make purchases. But remember that cash in your house or wallet and not in your bank account can easily be lost or stolen.
Phone numbers for your financial services providers: These would include local and toll-free numbers for your bank, credit card companies, brokerage firms (for stocks, bonds or mutual fund investments) and insurance companies. Why have these numbers handy? You may need to defer a payment, replace lost cards or documents, open new accounts, or otherwise request assistance. If you have people you regularly deal with, have their phone numbers on your list, too. "Working with someone who knows you can speed things up and provide you with some additional peace of mind," said Kincaid.
Important account numbers: These would include bank and brokerage account numbers, credit card numbers, and homeowner's or renter's insurance policy numbers. Kincaid also suggests copying the front and back of your credit cards (and keeping them in a safe place). "Often times, if you have a copy of your credit card and a valid ID, you can make a purchase without having your actual card," she explained. Plus, the photocopies can help you keep track of your account numbers and company phone numbers.
The key to your safe deposit box: You can't get into your safe deposit box at the bank without your key, no matter how many forms of identification you have. Also, while many banks issue two keys when a box is rented, simply giving someone else a key doesn't allow that person access to a box in an emergency. He or she also must be designated in the bank's records as a joint renter or be appointed a "deputy" or "agent" who has access to your box. Contact your bank about the proper arrangements.
What to Keep Where
After you've gathered your most important financial items and documents, protect them as well as you can, while also ensuring you have access to them in an emergency. Here's a reasonable strategy for many people:
Make backup copies of important documents. You'll want duplicates for yourself, but also consider giving copies to loved ones or at least let them know where to find your records in an emergency. You can make copies the old-fashioned way. But a more efficient option is to scan them onto disks, which can hold significant amounts of images and are easy to store or send to others.
Also, because a disaster can cover a wide area, "it's often best to store backups some distance from your home, even in another state," said Michael Jackson, an Associate Director of the FDIC's Division of Supervision and Consumer Protection. "Leaving your only copy at the next-door neighbor's or even across town is probably not a good idea."
Determine what to keep at home and what to store in a safe deposit box at your bank. A safe deposit box is best for protecting certain papers that could be difficult or impossible to replace but not anything you might need to access quickly. What should you put in a safe deposit box? Examples include a birth certificate and originals of important contracts. What's better left safely at home, preferably in a durable, fireproof safe? Your passport and medical-care directives come to mind because you might need these on short notice. Consult your attorney before putting an original will in a safe deposit box. That's because a few states do not permit immediate access to a safe deposit box after a person dies, so there may be complications accessing a will in a box.
Seal the most important original documents in airtight and waterproof plastic bags or containers to prevent water damage. Be aware that safe deposit boxes are water resistant but not waterproof.
Prepare one or more emergency evacuation bags. Most of what you're likely to pack inside will be related to personal safety — first aid kits, prescription medications to last several days, flashlights and so on. But your emergency kit also is the place to keep some essential financial items and documents, such as cash, checks, copies of your credit cards and identification cards, a key to your safe deposit box, and contact information for your financial services providers. Also periodically review the contents of the bag to make sure the contents are up to date. It won't do you any good if the checks are for a closed account.
Make sure each evacuation bag is waterproof and easy to carry, and that it's kept in a secure place at home. "Remember, you're putting very valuable items into a bag that's intended to be easy for you to carry away in a disaster, not for a thief to carry away in a robbery," warned William Kmetz, an FDIC official who specializes in security issues.
What Else to Consider
Sign up for direct deposit. Having your paycheck and other payments transmitted directly into your account will give you better access to those funds by check or ATM because you won't have to deliver the deposit to the bank or rely on mail service, which could be delayed. Note: There could be delays in the processing of direct deposits in a disaster situation but the problem is usually fixed within a reasonable time frame.
Arrange for automatic bill payments from your bank account. This service enables you to make scheduled payments — such as for your phone bill, insurance premiums and loan payments — and avoid late charges or service interruptions. "Automatic bill payment greatly reduces your need to write or mail checks," said Jackson. "You don't have to worry about essential bills being paid, and in an emergency that can be a real bonus."
Consider signing up for Internet banking services. This also makes it possible to conduct your banking business without writing checks.
Review your insurance coverage. Make sure you have enough insurance to cover the cost to replace or repair your home, car and other valuable property.
With this warning about the financial side of disaster preparedness, our goal is to inform and motivate you, not to scare you. The FDIC wants you to know that you can and should be proactive in "expecting the unexpected." We also want you to know that you don't have to go through this process alone. There are numerous organizations and government agencies on the local, state and national level — including the FDIC on banking matters (see For More Information from the FDIC) — that can be tremendous sources of help and information as you plan your strategy and if you should ever need them in an emergency.
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