Every summer, Kerry Taylor knows she might suddenly need to round up her family and flee her home.
Ms. Taylor lives on a farm in the interior of British Columbia, a heavily forested area that is threatened by forest fires. “When I moved here, it became real to me that I could lose everything with five or 10 minutes’ notice,” she says. “So the idea of protecting myself and my contents became extremely important, because some things you can never replace and other things are just a pain to replace.”
Ms. Taylor, the frugal financial blogger behind Squawkfox.com, has given some thought to what she would grab if she had five minutes or 24 hours’ notice to get out. More important, she takes specific steps to safeguard her belongings.
Many Canadians don’t live in regions where forest fires, tsunamis or earthquakes are a regular threat, but that doesn’t mean they shouldn’t take steps to be financially prepared for a natural disaster or other unforseen emergency. “Look at Sandy and how many people lost a portion of their homes,” Ms. Taylor says. “You could have your house flood or lose your house in a random electrical fire – things happen, so if you care about your financial situation, you need to protect it.”
The first thing everyone should do, Ms. Taylor says, is carefully read his or her insurance policy to be clear on what is and is not protected. For instance, damage to homes from wind or hail is covered by most home insurance policies but flooding when rivers or dams overflow onto dry land and damage residential areas is usually not, according to the Insurance Bureau of Canada.
Another thing Ms. Taylor does each year is walk through her house and take pictures of all her belongings. She photographs her jewellery, clothing, electronics – even the pots and pans in her pantry. “It is very important to prove to your insurance company that you owned what you say you owned.” This kind of inventory can help you keep track of your belongings and make it easier to file a successful claim in the event of a fire, flood or robbery, she says.
Next, she scans all of her family’s important documents, including birth certificates, passports, drivers’ licenses, her wedding certificate, as well as financial information, such as bank accounts, credit card details and insurance policies, and burns that onto a USB stick. Every year, she updates this information and puts it in a safety deposit box at the bank.
“My husband lost all of his childhood photographs in a house fire when he was kid, so we back everything up, including pictures, and store it off site,” Ms. Taylor says. “Having a backup is no good if your house is burning down with that backup.”
Every family should be prepared for a “what-if scenario,” says Al Nagy, an Edmonton-based certified financial planner with Investors Group. “I always recommend to my clients that they have access to between three and six months of income. Whether it be in the form of cash or a line of credit, liquidity is very important.”
A natural disaster like a fire, earthquake, ice storm or flood could leave a family homeless. “If your house is destroyed, you would need access to cash to house, clothe and feed yourself. Insurance payouts take time, so you need to have resources to carry you through.”
Robert Tremblay, director of research with the Insurance Bureau of Canada, says climate projection models suggest Canada is going to experience more and more extreme weather.
Insurance payouts for property damaged by severe weather are topping the $1-billion mark, which used to be rare. The record was set during the ice storms of 1998 – which cost $1.8-billion when adjusted for inflation.