One of the biggest news stories of 2012 was Hurricane Sandy, which wiped out entire communities along the New Jersey shore and methodically brought New York City and parts of New England to their knees in late October. It led to more than 250 deaths, damaged countless homes and small businesses, and forced many to go without power or access to basic services for weeks. In all, the storm caused nearly $70 billion in damage.
While this experience was unforgettable, it is important to remember that it was by no means only a one time thing.
With hurricane season upon us once again, it is important to remember one of the enduring lessons of Hurricane Sandy: Natural disasters no longer discriminate on the basis of geography. Indeed, whereas conventional wisdom once confined them to the Gulf of Mexico or the Atlantic Coast of Florida, these powerful storms are capable of making landfall in regions of the country never before thought possible.
In very much the same way, tornadoes, major floods and wildfires have seemingly become more numerous and intense, affecting areas and inflicting harm in places previously unaccustomed to their wrath. As a result, Americans, coast to coast, are more vulnerable to dangerous storms and other acts of God than ever before.
With a practice based in Lafayette, La., we know all too well the potential perils associated with natural disasters, having borne the brunt of a series of powerful and damaging storms in recent years – including Hurricane Katrina, the most destructive hurricane ever to come ashore in the United States. In this part of the country, disaster preparedness is a way of life, and, thus, has to be a crucial element of any comprehensive wealth management strategy.
Here are four steps you can take now to adequately address potential natural disasters:
Maintain proper insurance coverage, especially if you are a small business owner
Virtually all homeowners are required to have some sort of insurance on their property. It is, however, important to note that not all policies are created equally. Though many simply assume that practically all types of damage is covered, the fact remains that most policies contain exclusions, and there is no more inopportune time to find out about a gap in coverage than where there is five inches of standing water in your living room.
Therefore, it is your duty to understand precisely what type of insurance coverage you have and whether it is appropriate. This is especially important for small business owners, each of which must have business continuation insurance to pay bills, cover salaries and keep valuable employees.
Establish an emergency liquidity fund
You should have at least six months' worth of easily accessible reserves. And if you don't already, come up with a plan to get there as soon as possible, even if it means converting long-term, relatively illiquid assets into vehicles that can be turned into cash quickly. When it comes to dealing with emergencies, long-term security is great, but short-term solvency should win out every time.
Always have cash on hand
While liquidity is one thing, cash on hand is another. As the victims of Sandy have found out, restoring power after a natural disaster can often prove difficult and fleeting, and when businesses are off the grid debit and credit cards are essentially worthless. Each family should have at least $1,000 per person of cash on hand to survive a potential currency-based economy.
Store critical documents properly
It's best not to store
Social Security cards, passports, wills and important medical papers in a safety deposit box at the local bank – these are highly unlikely to remain open in an emergency situation, when you might need these documents the most. Such items should instead be placed in a fire-and flood-proof safe in your home, where they will be much more accessible than in a local bank branch during a natural disaster.
Andrew Ahrens is president of Ahrens Investment Partners a wealth management firm with approximately $750 million in brokerage and advisory assets. Based in Louisiana, Ahrens Investment Partners is focused on serving a high net worth client base comprised of successful professionals and business owners, as well as affluent families and individuals in retirement.
