Well, irrespective of the fact that whether one is a victim of a disaster or not, person should always have a foolproof financial plan to protect their financial life from any unfortunate event. While talking about disaster affecting financial life, there is little which one can do to prevent it but certainly there are steps which one can take to protect their families from getting financially hit in case a disaster occur.
1) How important is it to guard oneself financially, against these natural calamities?
Whether it is a calamity or something else, which severely affects a person’s financial life, should always be protected because financial freedom and security is one of the paramount objectives of doing the entire financial planning. It is very important to guard oneself against any natural calamity because that has the effect of completely wiping out all the belongings and leave a person without food, water, clothing and shelter. If you aren't prepared for it then one might just lose all of their belongings and may get wiped out financially.
Worst case, these disasters may even bring injuries which can make them physical unfit to work for time being to life and their entire life will go haywire without a sound financial back up.
2) How can one get financially prepared to protect them against any disaster?
Well, irrespective of the fact that whether one is a victim of a disaster or not, person should always have a foolproof financial plan to protect their financial life from any unfortunate event. While talking about disaster affecting financial life, there is little which one can do to prevent it but certainly there are steps which one can take to protect their families from getting financially hit in case a disaster occur.
Following are the ways one should follow to prepare themselves against any disaster:-
A) Regularly review & Monitor all your insurance Policies & Coverage.
- Insurance Audit: first thing you should do it is to do a through insurance audit, it means calculate how much insurance is needed to protect your family in case of any unfortunate event affecting you severely. Second step is to identify the need of buying adequate cover for Home Insurance, Life Insurance and Personal accidental policy.
- Check Inclusions & Exclusions: The biggest disaster would be a situation that in spite of having an insurance plan in place, one doesn’t get the cover or get insufficient amount. This happens mostly because of the various exclusions as attached to one’s insurance plans. First thing to check before buying a cover is to know what all it covers!
- Review by a financial planner: if needed, get your insurance audit done by an ethical financial planner so that you can buy a product, which is based on you & your family’s health and life insurance needs.
B) Prepare an Inventory of all your Possessions & Belongings.
The first thing before buying a cover for any probable disaster is to make a list of an inventory of all the assets & personal belongings. It will be required to assess what’s been lost at a later stage and this will help during the process of insurance claim. You can also digitally record it either by a video shoot or photos for your own reference. You also need to keep a back up of this written/digital record for a ready reference and don’t forget to update it whenever you make any major purchases.
C) Do you have an Emergency fund?
As you are aware that in case of any natural calamity, we will find most of our financial institutions getting closed down or ATMs going out of order for a no. of days to months together. What will you do in this scenario? Always have your emergency fund ready for meeting any unpleasant financial situation; ideally you should always have at least 6 months of provision to manage your household expenses.
D) Handy information for all your policies!
You should prepare a list of all the policy you have in terms of its Policy numbers, contact details like telephone Numbers, Email ids and claim settlement process. Give it to a trusted family member or a friend to be stored at a distant place.
E) What are the other documents to be kept safely?
Some of the other documents you need to have a back up are as follows:-
- All your Insurance policies.
- Your property titles, deeds etc.
- Registration papers for your car and other assets.
- Last 8 year’s Tax and financial records.
- Your originals will or power of attorney, if any.
- Details of all the liabilities like credit card statements/ home loan/personal loans etc.
- Details of jewelry and other personal belongings.
- Share Certificates/ Demat account details for stocks/ bonds/Mutual funds.
- Any other documents having a financial bearing.
3) Are there any financial products available in the market to safeguard against this?
We do have various policies that cover property and life from any natural calamity like fire, floods or an earthquake but still we do not have any 'natural catastrophe cover' for specifically catering to the dire need of protecting against these natural disasters. There are majorly three types of financial products in the form of an insurance policy available in India which can help you cover in different ways as follows: -
Home insurance
The first thing, any natural calamity affects is usually the property. Many times we have seen people buying cover to protect against basic fire insurance, which covers their house against fire or lightening, storms or even floods. Any cover against earthquake generally comes as an add-on due to the fact that it depends primarily on the geographical location your house falls in. You can also protect your house by buying an overall householder’s package policy, which apart from protecting your house from fire also protects you from burglary or any other mechanical or electrical breakdowns.
Personal accident insurance
Any natural disaster may have the effect of seriously injuring or making a person disabled for life. To provide compensation against any such calamity having a bearing on your working conditions, personal accident policies are in place. These plan covers death, permanent disability, permanent partial disability and temporary total disability.
This plan also comes as a part of your household policy but one can always buy it separately after analyzing the pros and cons of buying a customized product than a ready made product.
Life insurance
What is worse than loosing a life in case of any natural calamity and leaving a family without a future? To offset this, always make sure to have an adequate insurance cover to protect your family even in your absence. Buy a good term insurance plan to meet your financial needs based on your overall comprehensive financial planning.
Let me explain these plans in detail in the upcoming & concluding part of this article, till then do your financial audit and protect yourself from any sort of financial disaster. Keep reading this space and stay tuned.
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