No one wants to consider the possibility of a natural disaster impacting their life, but with extreme weather events on the rise, the risks they pose are increasingly difficult to ignore.
In 2024, the U.S. experienced 27 natural disaster events with economic losses exceeding $1 billion each, according to the National Centers for Environmental Information.1 And these disasters—from wildfires to hurricanes, tornadoes, earthquakes and floods—disrupt more lives than you might realize: in FEMA’s 2023 National Household Survey on Disaster Preparedness, 54 percent of people said a natural disaster had affected them or their family members.2
These statistics drive home the importance of being prepared both physically and financially for the unexpected. And while you can’t prevent natural disasters from happening, there are a number of steps you can take to increase your financial resilience in case the unthinkable happens.
In addition to planning for your physical safety, here are some financial must-haves to help safeguard your assets against natural disasters:
1. Insurance
Comprehensive insurance coverage is the first line of defense against potential losses, says Melissa Winn, a wealth strategist at RBC Wealth Management–U.S. Make sure you understand all weather-related risks and vulnerabilities for your geographic area. There are interactive maps and tools, such as FEMA’s National Risk Index , that can help with this.
Then, review your policies with your insurance agent, as they could be insufficient, incomplete or outdated. With your home or vacation properties, for instance, make sure coverage accurately reflects the current value, applies to different types of disasters (which may require riders or separate policies) and gives you sufficient compensation to rebuild if needed. If you own a business or have luxury vehicles, watercraft or valuable collections, make sure you have adequate coverage for those assets, too. A financial advisor can help you with that review.
Additionally, long-term care, disability and life insurance are important safety nets for worst-case scenarios. “If something happens to you, what will happen to the people around you?” Winn asks. “You want to make sure your family is in the best-possible position if the worst happens.”
2. Estate planning
It’s important for every family to have estate-planning documents in order, but in times of crisis, such as during a natural disaster, they become even more critical. A well-crafted estate plan helps prepare for the financial aftermath of a disaster by giving clear instructions for managing assets and responsibilities. It should include elements such as a revocable living trust, will, power of attorney, advanced health care directive, health care proxy and business succession plan. Knowing the important decisions have already been made can help minimize stress and confusion in times of chaos.
Once those fully executed documents are in place, the question then becomes: where to keep them? One physical copy at home is not good enough, when they could be destroyed in a fire, flood, earthquake or other extreme weather event.
“Keep those documents—as well as all important personal, medical, financial and legal records—in more than one place, and have copies accessible enough that you can grab them and go,” says Winn, who points out that your advisors and attorneys should also have copies on file. “It takes very little effort to get those documents digitized and put on an online platform.”
You should also have contact information for your medical, financial and legal advisors at the ready, loaded into your phone and even printed out in case of battery or connectivity issues.
3. Liquidity
Let’s say disaster strikes and you have to evacuate. Do you have enough cash on hand to take care of your family for an extended period of time?
Even high-net-worth families—whose wealth is often tied up in assets—can find themselves in a cash crunch if they have not prepared for potential emergency liquidity needs.
No matter your level of wealth, it’s smart to keep some cash on hand—and a checkbook, too—in case of widespread power outages that leave ATMs or credit cards inoperable. A common rule of thumb is to maintain enough liquidity to cover six to 12 months’ worth of living expenses to get you through a transition period.
One popular financial instrument some people assume can help them out with this is a home equity line of credit (HELOC). But don’t be so sure, warns Matt Franks, head of wealth management lending at RBC Wealth Management–U.S. Such credit availability is based on the assumed value of your home—and if your neighborhood is swept up in a disaster, that home may be damaged or gone.
“Then the lender has no way of assessing what your home’s value is, even if the last appraisal was just six months ago,” Franks says. “So HELOCs often get shut down or limited. Relying on them for liquidity is imprudent at best.”
Instead, many wealth management firms offer short-term lending, at attractive rates, based on the value of your holdings. “Think of it as a short-term bridge loan, which is generally what people need in times of natural disaster,” Franks says. “Securities-based lending typically provides lower interest rates than other types of lending because the collateral is less risky.”
“Just remember to borrow only what you need, not what you can,” he adds.
4. Record of belongings
In the aftermath of disaster, you may have to deal with the unpleasantness of insurance claims. That’s why you should take time now to assemble as many photo and video records as possible of your belongings, along with any documentation proving their value. That applies, in particular, to high-value items—such as antiques, artwork and jewelry—which likely need their own insurance coverage beyond standard homeowner policies.
Proactively documenting your valuables can help set you up for a smoother claims process and could increase your likelihood of receiving a favorable settlement.
They can also serve a sentimental purpose: if your home is damaged or destroyed, photos and videos can help preserve the memory of your valued possessions.
Don’t wait to prepare
While planning for “what-if” scenarios like natural disasters may not be high on your priority list, it could make all the difference if one of those hypothetical situations ever becomes a reality.
“The biggest mistakes people make are putting off preparations and believing that disasters could never happen to them,” Winn says.
The truth is, there’s no way to know if or when disaster will strike—natural or otherwise. But knowing you’ve done all you can to protect your family and your wealth can help give you a sense of control around the uncertainty.
“I try to be a calming influence and say: ‘These things happen. You’re OK, your family is OK, your pets are OK. We’ll get through this together.'”
Financial preparedness involves many different steps that require time and planning. That’s why taking care of as much as you can in advance—and having trusted advisors in your corner—are key to weathering any storm.
Sources:
1. “Billion-Dollar Weather and Climate Disasters,” National Centers for Environmental Information (NCEI).
2. “2023 National Household Survey on Disaster Preparedness,” FEMA, U.S. Department of Homeland Security.