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5/20/2018

Don't let a disaster ruin your finances. Be ready with emergency savings.

When hurricanes, tornados, floods and other major natural disasters strike, people look to the federal government for financial relief. But not every disaster qualifies for funding.

High winds and severe storms can down trees, start fires, and bring flooding in certain areas. Even though the damages to your home may be severe and costly to repair, you still may not qualify for federal relief. A natural disaster emergency fund can help you be financially prepared.

Insurance doesn't cover everything

Your homeowners insurance deductible is your out-of-pocket cost before your insurance kicks in. Here are some important factors to consider about homeowners insurance deductibles:

  • Homeowners insurance deductibles can be either a dollar amount, a percentage of the coverage for your home, or a combination of both.
  • Standard homeowners policies don't cover earthquakes or floods. You'll need to look into separate policies to cover those events. In areas more prone to these types of disasters, the deductibles and premiums may be higher than your normal homeowners insurance costs.
  • Unlike your annual health insurance deductible, homeowners insurance deductibles apply to each and every claim you make during a year. So, if you live in an area prone to high winds, hurricanes or tornadoes, you could end up reaching into your own pocket multiple times throughout the year to pay the deductible.
  • You may need to pay some expenses up-front or out-of-pocket before you receive your insurance payment.

Three important questions

Ask yourself the following questions when setting up your emergency savings account and deciding how much you need to save:

  1. Do I have easy access to enough cash to cover several days of expenses for lodging, food and transportation?
  2. Have I created a home inventory so I have a realistic picture of what it would cost to replace my belongings?
  3. Do I have enough set aside to pay for what insurance might not cover?

Building up your natural disaster emergency fund with a high-yield savings or money market account at an online-only bank can help your dollars grow faster. Online-only banks typically offer interest rates higher than the national average with daily compounding and few, if any, fees.

Being financially prepared for a disaster is essential so start saving now. Hurricanes, tornados, earthquakes and severe storms are inevitable. Make sure you have a disaster-focused emergency plan that includes an emergency fund.

Additional tips

In addition to creating your emergency savings fund, organize your financial and personal documents and keep them in a safe place such as a disaster-proof box that you can get to easily. Make a backup of the information and store it in a password-protected online location or with a trusted friend or relative.

If you rent, obtain renter's insurance. It offers coverage for your personal belongings, liability, and additional living expenses. The cost of repairing the building in which you live is the responsibility of the landlord.

Don't let a natural disaster wreak havoc with your finances. Let CIT Bank help you be financially prepared. For information on accounts and current interest rates, click here.

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