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The major California wildfires in early 2025 served as a reminder that natural disasters cause immense emotional and financial upheaval.
Data shows a total wage loss of $297 million for local businesses and employees in the affected areas. Total property and capital loss could range between $76 billion and $131 billion. Furthermore, Californians will also face increasingly higher insurance premiums, and housing markets will grow more unaffordable.
According to FEMA, the U.S. experienced near-record numbers of climate-related disasters last year, with 90 major disasters declared. With these occurring more regularly, having a financial plan is more critical than ever. As a Certified Financial Planner, I recommend a holistic financial approach to help protect clients and prepare for every imaginable need.
Key Takeaways
- Digitize and store essential documents outside your home to ensure easy access to key information in an emergency.
- Ensure your insurance covers potential losses and ask about additional riders for natural disasters like floods or earthquakes.
- Collaborate with a financial advisor to develop a comprehensive plan that includes emergency savings and protects against financial vulnerabilities.
What I’m Telling My Clients
Clients can minimize the economic impact of natural disasters by employing the following three strategies:
1. Get Your Documents in Order
Digitize essential documents (i.e., insurance policies, IDs, medical records, property deeds) and store physical copies in an easily accessible location outside one’s residence.
If a fire or flood should occur and the home is destroyed, the documents will allow you to communicate with relevant companies without the anxiety of having to guess or track down what type of policies, benefits, and account numbers you have.
Important
Coordinate with family members who may be willing to welcome your loved ones should an emergency arise. Create a predesignated meeting area and primary third-party point of contact to inform everyone of your safety status.
2. Review Your Protection Policies
Evaluate if the loss of use coverage adequately meets your monthly household expenses or if you need to find a carrier that gives you more protection. Communicate with your insurance agent and inquire about special endorsements and riders, such as flood or earthquake insurance, that can provide peace of mind if you are displaced.
Important financial questions to consider are: “What type of coverage may I need?”; “Is my homeowner’s insurance sufficient?”; “Do I have enough emergency cash to sustain me if I am displaced?”
3. Sit with a Finance Professional
Holistic, comprehensive planning focuses on multiple areas of impact, including investments, tax planning, retirement planning, and estate planning, to name a few. Having this in order will alleviate any additional stress should disaster strike.
Tip
Discuss your emergency fund with your financial advisor to ensure you have enough coverage. Typically, funds can cover around 6 months of expenses.
Maintaining a relationship with a professional with the expertise to advise, such as a certified financial practitioner, will allow you to identify potential financial vulnerabilities more effectively.
The Bottom Line
Knowing that natural disasters are inevitable can make one feel powerless. While clients have limited control over such events, they can control their financial preparedness. By implementing these strategies, clients can feel more confident and rest easier by having a plan in place should a crisis strike.
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