Four important steps to help you prepare for disasters
When disaster strikes, there are countless ways to ensure your family’s safety. But one often-overlooked aspect is having enough finances for the aftermath.
During a natural disaster, we rescue as much as we can: our family, pets, and precious assets. But when it’s over, what happens if you have no resources for rehabilitation? How do you go back to your normal life?
The common scenario is that most households are not financially prepared for an emergency. According to the Study on Lifestyles, Attitudes and Relationships conducted by Sun Life Financial, 45% of Filipinos are still dependent on their relatives. The first option is often to borrow in times of distress. However, this will not always be a good fallback, especially if your relatives need to allocate their resources for their own needs.
Family emergencies do not just refer to natural disasters – they can be events such as sudden illnesses, roadside accidents, and even death. All of these can easily wipe out your savings.
Take definite steps to avoid money meltdowns. Include a financial plan in your preparations for worst-case scenarios.
Step 1: Manage your risk
Being prepared for disaster isn’t just about small choices – it’s also about big lifestyle decisions. In the long run, they add up to savings – and a higher chance of getting better disaster coverage.
There’s no such thing as being 100% “risk-free” but every proactive measure helps:
- Have regular health check-ups for you and your family
- Cut back on vices like smoking or heavy drinking, which can increase your risk for diseases like cancer
- Move or avoid living in disaster-prone areas, such as riverside properties or steep slopes
- If your job requires you to do activities such as field work or travelling, ask if they provide short-term insurance
Step 2: Know the cost of catastrophes
The Philippines is one of the most disaster-prone countries in the world. In 2011, disasters cost our country over P26 billion. In 2012, we ranked second in Asia for number of disasters reported that year. This is your day-to-day reality, and it’s costly to boot.
Disasters can harm both life and property. Among other things, be prepared to spend for the following:
- Hospital bills
- Medicines and continuing care
- Property repair costs
- Replenishment of supplies
- Death expenses
According to financial advisors, the rule of thumb is to have a definite emergency fund. Savings of at least three to six times of your monthly household earnings should be left untouched for emergency situations.
Step 3: Fortify your finances
Your emergency fund will tide you over for immediate needs like food, transportation, or principal medical care. But what about the long-term costs, like therapy or rebuilding a home?
The simple solution: get insurance. Think of it as your first line of defense against emergencies. If you feel that it is a waste of money, consider the following all-too common scenarios:
- Without insurance to manage your risks, you’ll have to shell out bigger sums, and possibly end up in debt.
- HMO cards, Pag-Ibig, and Philhealth will not cover long-term expenses.
- Recuperating or caring for a sick family member can prevent you from working.
- Disasters will affect the operations and facilities of your business
- Physical assets like jewelry can be taken away in a single fire or flashflood.
Here are the common insurance types that you should have:
Up to P1M for:
- Diagnosis of critical illness
- Hospital confinement
(depends on type of coverage, whether for critical illness, or hospital income)
Up to P300,000 for:
- Death due to natural causes, illness, or accident
Up to P2M for:
- Damages to residential property and/or contents caused by fire
Up to P788,000 for:
- Damage to motor vehicles caused by theft or acts of nature
Up to P1M for:
- Dismemberment, disability, or death due to accident
|*Based on rates provided by a Sun Life Financial advisor for a non-smoking 25 year-old male|
Think of insurance as one of your strongholds. Disasters can ruin your business, or render you unfit to work. Insurance covers for the damages. If it is a plan coupled with mutual funds, it also earns passively through investment.
Step 4: Protect your financial records
Aside from assembling emergency and first aid kits, your insurance and bank documents should also be safe but readily accessible at all times. You will need them for withdrawing money or collecting coverage. All family members should also know where to find them.
Here are some tips:
- Secure important documents (insurance contracts, bank statements, IDs) in a sealable plastic envelope or waterproof case.
- Keep photocopies of your documents in the car.
- Create a property inventory (useful for filing insurance claims). A simple way to do it would be to use your camera phone and record a walking video in each room. Photos would also be OK.
- Make the most out of technology. Upload scans and images to a cloud drive, and don’t forget to set a password.
Start for tomorrow
Creating a disaster-proof financial plan takes as much legwork as physical preparedness. But in the long run, it will not only save you some cash, it will also give you piece of mind -- secure with the knowledge that you can provide care for your family, no matter what tomorrow brings. – Rappler.com
For more tips on how to achieve brighter finances, family life, and health & wellness, visit www.brighterlife.com.ph