How to financially prepare for weather disasters

Illustration of home windows and a piggy bank
Illustration of home windows and a piggy bank Illustrated / Getty Images

Between devastating wildfires and hurricane season, extreme weather events are likely on the minds of many. And unfortunately, due to climate change, they are likely a sign of things to come.

"Climate change and weather disasters don't just add inconveniences and potential danger to our lives, but they can also impact our bank accounts," according to The Balance, particularly if you're directly impacted. These effects can include home repairs and insurance deductibles, but they may also encompass "time in hotels, work disruptions and other unexpected costs," depending on the extent of the damage. So while you can't control the future path of Mother Nature, there are steps you can take now to protect yourself financially.

1. Expand your emergency fund

The general rule of thumb for how much you should have stashed away in your emergency fund is enough to cover three to six months of living expenses. But if you're concerned about extreme weather, you might consider "aiming closer to the six months' figure," given that "disasters can have more unpredictable costs," stated Nerdwallet.

According to The Balance, you might strive to save even more than that, possibly as much as 12 months' worth of expenses in a high-yield savings account. Robust cash savings can "allow your family to stay housed while covering repairs after major events" and also "help ease the strain of paycheck-to-paycheck living," per The Balance.

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2. Reassess your insurance coverage

"Part of your disaster plan should be determining whether you're carrying the right amount of insurance," stated The Washington Post. Take some time when you're not in crisis to determine whether you have adequate coverage in the event of an emergency.

For instance, the Post suggested considering questions such as whether your policy will "replace the full value of your possessions'' and whether you already have life insurance." Other forms of coverage you might consider include disability insurance, if you happen to get injured in a natural disaster, and flood insurance, as "homeowners and renters insurance do not typically cover flood damage" and must be purchased separately, per the Post. Renters also shouldn't neglect to get coverage to protect their possessions.

As you're shopping around, take the time to get quotes from multiple insurers to see how they stack up. And if you're living in an area where it's difficult to secure insurance, you may be able to get help from an "independent agent or broker," reported Nerdwallet.

3. Storm-proof your property

By taking the time to weather-proof your home in advance of a weather event, you might be able to minimize the damage it sustains. The steps you'll want to take will vary depending on what type of weather event you're expecting. Per Nerdwallet, if you're anticipating flooding, "have sandbags available and clear your gutters." Meanwhile, if it's a wildfire you're worried about, you might "look into fire-resistant vents and roof materials," stated Nerdwallet. For a hurricane, according to Nerdwallet, you should "cover windows with plywood or metal storm shutters."

4. Secure important documents and take a home inventory

Don't neglect to prepare yourself, as well. According to the Post, to get ready for a quick evacuation, you'll want to purchase a safe that is "waterproof, fire-resistant and light enough to carry." Plan to keep "all your household's important financial documents in this box, including your passport; insurance policies; extra checks; a copy of your driver's license; your Social Security card (or at least write down the number); bank, investment and credit card account numbers; and key legal documents such as wills, marriage and birth certificates, and the titles to your home and vehicles," advised the Post. You should also back up any important documents and either give them to a trusted family member or friend who lives elsewhere or upload them to the cloud.

Other items you might want to have on hand in case disaster strikes include "some cash or traveler's checks," per the Post. Also, take a video or photos for "proof of the expensive stuff you own," so you have that evidence later on for insurance, said the Post.

5. Invest more sustainably

You can prepare your investment portfolio for the new climate reality. Far from capitalizing on disaster, you can make financial moves that will not only be in your best interest long-term but also that of the environment. For instance, per The Balance, you might "consider companies that meet environmental, social and governance (ESG) criteria, funds that focus on the environment, and even green bonds that fund environmentally friendly projects." Meanwhile, you might avoid investing in industries like oil and gas, which "could be positioned to take more of the brunt from economic shifts due to climate change," stated The Balance.

This mindset can extend beyond just investing and into your banking. Per Nerdwallet, a "handful of banks and credit unions have third-party certifications to prove that their customers' deposits don't support the fossil fuel industry."

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week. 

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