Protecting yourself financially from natural disasters

Natural disasters are likely to become more frequent and more extreme in coming years.

The priority in any disaster is protecting lives, but what steps can you take to prepare and protect yourself from the financial impacts of events such as bushfires and floods?

1. Check your general insurance like house and car policies

Most Australians are either uninsured or underinsured. That means even if you have the right type of insurance policy, you may have underestimated the amount you need to get back on your feet.

For example, past events show us it often costs more to rebuild after a fire, flood or storm that it would to buy a new property. Why? Well, there's the costs of clearing debris, as well as increased demand for tradies and resources. Many insurance companies now offer total replacement cover which includes all the costs to rebuild your home to the standard it was prior to an event. Chances are though that if you have home building insurance you have an agreed sum insured which covers you up to a set amount. If that's the case, you should review this amount every year before you renew your policy, and it may help to use online calculators to estimate the cost of replacement of your home.

If you're renting, you generally won't be covered by the owner's policies but can still take out contents only insurance.

If you own an investment or holiday property, check out landlord insurance which covers you for loss of rent - standard home and contents policies do not offer these additional benefits.

Don't leave it to the last minute to get cover - insurance companies will ask if you're under threat of a disaster and won't issue policies in these circumstances.

2. Check your personal insurances

We're talking here about life, total and permanent disability, trauma and income protection. Families can be devastated emotionally and financially when injuries and illnesses occur during or after disasters. The right insurances can help ease the stress.

My Millennial Money has a great podcast on the topic which includes a really good discussion about the different types of cover especially the pros and cons of insurance in super: 

3. Make copies of important documents

Whether you make physical or electronic copies on USB or in the cloud, ensure you have backups of documents like insurance policy details, licences, Wills and Powers of Attorney, bank account details, inventory of household goods, birth and marriage certificates, passport/visa details, medical records and prescriptions, credit and bank cards, and emergency contact details.

Keep a portable backup of your computer files (physical or cloud).

Keep these in a go-bag or emergency kit that you can grab quickly if you need to evacuate. You can find out more about being prepared for an emergency at the Australian Red Cross website. 

4. Have an emergency fund

Whether you save an amount into a dedicated savings account, your home loan offset or redraw account, or have a credit card as a last resort, having easy access to funds is important if you need to stock up on supplies or to help you relocate to a safe area. Having savings can also help if you're unable to return to work because your workplace is damaged or destroyed, or to meet expenses before insurance kicks in..

5. Make a list of support services

Know where you can get assistance if you need it. This may include Centrelink, national organisations such as the Red Cross, local groups, and family or friends. Think beyond the financial and physical support to include assistance with the trauma and grief that many people experience as the result of a disaster. Keep in mind that recovery can take a long time for individuals and communities.

6. If you are a business owner

Review your commercial insurances including key person cover and business interruption insurance. This applies whether you're a sole operator or employ staff. The right insurance can help alleviate the financial impact on your whole team if your business is affected.

7. Intentional investments

Whether you're investing directly or through your super fund, think about the impact of your choices. The science tells us that the climate is changing and this has a direct impact on natural disasters. You can use your investments to make a difference. You can find out more about responsible investing here.