Economic Survival in a Natural Disaster

January 19, 2006 – There is a lot of talk in the media aboutnatural disasters. In the past year the United States has faced hurricanes, flooding, tornados and fires. The first thing on the mind of anyone who goes through a disaster is physical survival. But what very few people consider is economic survival. Just because you lose all of your physical possessions doesn’t mean that you have to lose everything that you have worked for all of your life. But in order to survive economically, you need to do some pre-planning.

 

Natural disasters can take many forms and they are not allcreated equally. Some are highly localized, such as a tornado, while otherswill disrupt large geographic areas. These types of disasters includehurricanes and earthquakes.

 

One natural disaster that both the federal government andstate governments are preparing for is a flu pandemic caused by the spread ofbird flu. Scientists at the World Health Organization (WHO), the Centers forDisease Control (CDC), and the Department of Health and Human Services (HHS)are all in agreement on one point. It is not a matter of “if” this will happen,but a matter of “when”.

 

Within the past week, at a conference of concerned nationsbeing held in China ,$1.9 billion of money has been pledged to stop the spread of bird flu. If thisdisease gets out of control within the next two years, HHS estimates that asmany as 2 million Americans could die. It would be an unparalleled disasterboth in terms of death and the economy.

 

So what can you do to insure your economic survival? We’regoing to take a look at what I would call “normal” disasters and then we’lllook separately at the bird flu.

 

Your Everyday NaturalDisaster

 

Surviving the FirstFew Days!

 

If you have just lost your house to a disaster, you maythink that the area that the disaster impacts is irrelevant. It is not. Thewider the area of coverage, the more likely it is that you will see significantdisruptions in services, such as phone and electricity.

 

Disasters that cover wide areas also place considerably morestrain on government services. Hospitals may fill up or have to be evacuated.Police, fire and ambulatory services may be stretched to the point of notfunctioning at all.

 

One thing that very few people ever think about until it istoo late is that ATM’s in the disaster area will probably not work.

 

The downside of living in an electronic economy is that wehave become slaves to it. When the power goes out, or when phone services don’twork, the disruption is enormous. To prepare for a disaster, you really need tofigure that you will be on your own for up to a week.

 

This means that you will need to stockpile food and firstaid supplies. But it also means that you need to keep some cash on hand. Notonly will you find that ATM’s don’t work, but it is unlikely that credit cardswill work either. Most merchants are completely reliant on electronicprocessing for credit cards and debit cards. The only way that you will be ableto make a purchase in a disaster zone is with cash.

 

So how much do you keep on hand? Only you can answer thatquestion but you definitely don’t want to have too little. Figure out how muchmoney your family uses in a normal week and then double or triple that amount. Youcan figure that you will need to make some unforeseen purchases, and you mayalso face price gouging. Just remember when you are going through this exercisethat you are “planning” for a disaster.

 

The benefit of this is that you don’t have to put all ofyour money aside all at once. Furthermore, you don’t need to buy all of yoursupplies all at once. But you do need to start doing both, and give yourself atimeframe to complete the entire process. Then stick to your timeframe. Afteryou have your money on hand, don’t use it for any purpose other than adisaster. And make sure that you put it in a place that will survive, even ifyour house doesn’t.

 

Surviving the LongTerm!

 

In order for you to survive economically over the long term,you also need to be prepared.

 

There are a few things that are extremely important. Yourinsurance policies are at the top of this list. You should keep copies of allof your insurance policies in a safe place that you can easily grab if you haveto leave your home. You may also want to make copies of the policies and sendthem to a relative or friend that lives in another area of the country.

 

You should take pictures of the things that you own, andkeep them with your insurance policies. Pictures are one thing that insurancecompanies have trouble arguing with. If you have a digital camera, there areanumber of free websites that will allow you to upload your pictures and storethem for free. The more pictures you have, the better.

 

When you are putting all of this together, make sure thatyou have enough insurance, as well as the right kind of insurance.

 

Right now, it costs about $200 per square foot to rebuild ahome in a major metropolitan area. That doesn’t include the furnishings.

 

And a standard homeowner’s policy will not cover everydisaster. For instance, earthquakes require an earthquake policy rider.Likewise for hurricanes. Flood insurance is a completely separate policy and isonly available from the federal government. If you don’t have the rightinsurance, you’re in trouble.

 

One thing that you should look to see is if your policy hasan Additional Living Expense (ALE) rider. If you can get this, then you shouldconsider it. ALE can pay for the rent of a comparable home while you go throughthe rebuilding process. It can also pay for the rental of furniture.

 

Another thing to look at is a Code Upgrades Rider. A regularinsurance policy will only pay to rebuild your house on an “as is” basis. Ifyour home was constructed in 1950, it’s a safe bet that the building codes inyour area have changed. These changes normally increase the cost of rebuilding.If you want your insurance to cover these upgrades then you need this rider.

 

You should also look at getting Replacement Cost Coveragefor the contents of your home. Insurance typically pays out on a depreciatedbasis. This means that if you have a stereo that cost $300 when you purchasedit five years ago, but you can buy the same system on eBay for $50 today, then$50 is what you will get. Replacement cost coverage addresses this issue. Onlya few companies will offer this type of coverage and it is not cheap, but itcan be well worth the price if you ever do lose your home.

 

When a disaster hits, don’t blindly pick up the phone andreport it to your insurance company without first having some understanding ofthe amount of damage you have suffered. Then compare this to the appropriatepolicy. If you your damage don’t exceed your deductible, then you don’t want toinvolve the insurance company at all.

 

The reason for this is very simple. Insurance companies usea database called CLUE to track homes that have been damaged. Once your houseshows up in CLUE, it may hurt your resale price or, in the case of waterdamage, make your home uninsurable. This may not seem fair but it is a fact. Sodo your homework prior to reporting.

 

Once you do make a report to your insurance, you don’t haveto take what they offer you. Your insurance company will try to keep theircosts down. They may do this by steering you to certain contractors, or usingcheaper building materials. If you think that you are not being handled fairly,then it may be time to hire a public adjuster.

 

Public Adjusters become your advocate with the insurancecompany. They fight long and hard to get you the best deal. They typicallycharge a percentage of the amount that they collect but, because of theirexpertise, you will almost certainly come out better by using a public adjusterwhen you suffer a major loss. Just make sure that you check their referencesprior to hiring them. Scam artists are a dime a dozen after any major calamity.

 

Protecting Your Creditin a Disaster!

 

After you have made it through the first few days of adisaster, may become a real lifesaver. But you will need to take action in orderto protect it.

 

No credit grantor wants to be reported as being a “bad guy”when a disaster strikes. Virtually all credit grantors will be willing to workwith you to protect your credit, but action will be required on your part.

 

Call your creditors and explain your circumstances. If youmailed a bill just prior to a disaster, call and make sure that they receivedpayment. If you have bills due shortly after a disaster, let them know if yourbank is closed, or the post office isn’t open, or you have no access to checksbecause you lost your home. They will work with you. Normally they will agreeto postpone payments, waive late fees, and not report late payments or doanything else that will hurt your credit. But you do need to make the call.

 

So, What about theBird Flu

 

Bird flu may seem like an odd topic for ACCESS to cover, butthe economic ramifications of an outbreak of bird flu in the United States are just too high forus to ignore.

 

Here is a little history on the state of the disease, whatcan be expected, and what you can do to protect yourself economically.

 

First of all, the term bird-flu may be a bit off. That’sbecause flu actually originated in birds. The term really refers to strains offlu that are new and can only be passed from one bird to another. At somepoint, these flu strains mutate; first gaining the ability to be passed from abird to a human, and eventually being able to be passed from one human toanother. When this happens, these strains can be extremely lethal to people.This how pandemics begin.

 

Flu pandemics have happened before. In 1957 and 1968, therewere relatively small pandemics. But in 1918, the Spanish Flu became the mostdeadly disease in history. It killed between 30 and 40 million peopleworldwide. In the United States there were 675,000 deaths; 200,000 of these happening in a single month.

 

Starting in 1997, a new strain of flu known as H5N1 was seenin birds in Hong Kong. This strain had somedisturbing characteristics. First, it was 100% fatal to the birds that contractedit. Second, it had the ability to be passed from birds to humans. And finally,more than 50% of the people who have contracted the disease have died from it.

 

Authorities in Hong Kongwere able to contain the disease in 1997, but it reappeared in 2003 andcontainment may no longer be an option. Between 2003 and late 2005, the diseaseinfected more than 140 people in China, Thailand, Vietnam and Indonesia , killing more than 70 ofthem. But in October of last year, H5N1 migrated out of Southeast Asia andarrived in Turkey .And the Turkish version of H5N1 has mutated in a way that makes it much moreinfectious to humans.

 

Starting about three weeks ago, Turkish children begangetting the disease. In that time, it has killed five of them. And about twoweeks ago, wild birds in the Ukraine were also found to have the disease. This is extremely disturbing because the Ukraine isconsidered to be a European country.

 

The EconomicConsequences

 

Turkeyis the first country to experience severe economic consequences as a result ofbird flu. The country has a $2.5 billion poultry industry. Since October, salesof poultry products in Turkeyare off by 65%, and they continue to fall. The Turkish outbreak has already causedthe European Union to ban the importation of Turkish poultry products. And itis also leading to unemployment among those who work in the poultry industry inTurkey.

 

Now, compare that with a $35 billion poultry industry in the United States and you begin to get the picture.

 

But the poultry industry is only a small fraction of whatcan be expected if H5N1 begins to infect the general populations of Europe and North America. Virtually all segments of the economy areexpected to suffer. The World Bank estimates that the total cost of such apandemic will exceed $800 billion worldwide.

 

Protecting YourselfEconomically

 

Unfortunately, the things that you can do to protectyourself in the event of a pandemic are limited. But that doesn’t mean thatthere is nothing that you can do.

 

Both the federal government and the various stategovernments are working on plans to deal with a pandemic. All of these planshave some things in common. They include quarantining those infected,restrictions on travel, school closures and advising people to work from home.

 

The US Government is advising consumers through its pandemicflu website to prepare to be on theirown for up to 13 weeks. This means that you need not only food but othersupplies including any prescription or over the counter drugs that you take.And consumers should be prepared to face shortages of certain goods.

 

Once again, in a bird flu outbreak, cash will probably beking. While the government does not anticipate long term outages of things likephone service and power, short term disruptions may occur.  As with other disasters you will want to haveenough cash on hand to make emergency purchases.

 

The truth is that there is very little that the governmentwill be able to do if the bird flu arrives in the United States within the nextcouple of years. 

 

One thing that you can do to protect your family is updatingyour life insurance policy if you have one, and updating or establishing aWill.

 

It is unknown weather H5N1 will ever be able to be transmittedfrom one person to another, or if it will be the next great pandemic. But thegovernment is concerned enough about it to have committed $342 million in thepast week alone to fight the spread of the disease. The states are spendingmillions more. We would probably all be wise to keep these things in mind andplan accordingly.

 

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