With category 4 level Hurricane Michael hitting the Florida Panhandle with 155+ mile-an-hour winds, it’s probably a good time for people living near the coasts to reevaluate their financial preparedness for a hurricane. While it’s easy to assume that your homeowner’s policy will cover any damage, it’s better to be certain than to wind up paying thousands of dollars in damages.

Read our tips below and find out if you’re financially prepared in the event of a hurricane or other natural disaster.

Insurance Coverage

Insurance becomes much more important in the case of a disaster, and making sure you have appropriate coverage is key. According to AccuWeather, “$1.8 billion (2011 adjusted) is the median amount of damage caused by an Atlantic hurricane that hits land in the United States.” That doesn’t include the damage that hits inland, including flooding and property damage. The costliest Atlantic storm up till now was 2005's Hurricane Katrina, which caused $160 billion in property damage. Just one year, 2017, brought the next two – Harvey, causing $125 billion and Maria, estimated at $90 billion, according to the Weather Channel.  

Even though reading your homeowner’s insurance policy is less than thrilling, you need to go through it. You may assume your coverage extends to hurricanes, but the language can be muddy and confusing.

Brian Brandow of Debt Discipline said you might be surprised by the various ways insurance companies will classify natural disasters. It’s important to make sure you’re covered for each type that fits your location.

“Policies often divide coverage by the type of storm (tropical, category 1 hurricane, category 2 hurricane, etc.),” he said. “So depending on your policy, you could be covered for a category 1 hurricane and above, but not a tropical storm.”

Miami resident and an advisor for MoneySavingPro.com, Amanda Abella, said insurance coverage is definitely the most important aspect to figure out. As a Florida native, Abella has seen what happens when people assume their insurance will pay for hurricane damage without verifying their policy.

“Obviously you need to have some protections in place,” she said. “Because hurricanes can cause pretty much every kind of damage there is, it's actually kind of tricky. For example, private homeowner's insurance can cover wind damage, but not water damage. To make it more confusing, hurricane insurance may not cover flood damage so you would have to purchase it separately anyway. A lot of it just depends on where you live and what you actually need.” (For related reading, see: Does Renters Insurance Cover Water Damage? )

The Insurance Information Institute has created a Hurricane Season Insurance Checklist that you can use to verify that your coverage meets your expectations. Example questions include, “Do you know everything you own and how much it’s worth?” and “Does your policy provide enough additional living expenses coverage?” There’s also information about renter’s insurance and what information renters need to know about their hurricane coverage.

Emergency Fund

Even if you have perfect insurance for compensation, it’s also important to have an emergency fund stashed away. It may take months for your insurance company to reimburse you, so you need to have a way to pay for a hotel, necessities and basic repairs. Having a cash fund will make the transition easier and make you less frustrated with your insurance provider.

You also want to make sure that your emergency fund is liquid, meaning that you can access it easily. While keeping a rainy day fund in a CD might give you better returns, you won’t be able to easily get hold of it in a true emergency. Use a savings account that allows easy and fast transfers, so you’ll be able to access your money instantly.

“Most of the hurricane preparation is up to you in an effort to avoid having to deal with insurance companies,” Abella said.

You should also keep important original documents in one central place (such as a safe in the bank) and have emergency cash stored there as well. Keep copies of your insurance policy there. Even though your agent will have them on file, it’s important to make sure your end is covered. Then make sure you have duplicates of everything in another safe place – preferably far away, such as with a trusted friend or relative in another state. You can also store password-protected scans of documents in the Cloud. You might also keep copies in an emergency bag that you take with you if you have to evacuate your home. (For related reading, see: Eight Financial Safeguards if Disaster Strikes.)

Even if you’re relying on insurance coverage to get you through a storm, you want to also have your own preparedness systems in place. Abella recommends measures such as hurricane-impact windows, which can lessen the storm’s impact on your house.

“They are pricey, but they will save you major headaches and lots of money down the road – especially because insurance is ridiculously complicated when it comes to hurricanes,” she said.

The Bottom Line

Safety comes first, but ensuring your financial safety in the event of an emergency will make sure the life you’re protecting is a life worth living. Even when the hurricane season winds down, start planning for next year’s possible disaster.

Talk to your insurance agent, read through your policy and ask any questions you have. It’s better to be thorough and take your time than end up having coverage that’s inadequate. (For related reading, see: Prepare Your Finances to Handle Natural Disasters.)