Building a Personalized Disaster Plan for Clients: Pt. 2—The 4 Big Post-Disaster Dangers

A third concern that will affect anyone involved in a disaster situation is the claims and rebuilding process. While insurance coverage is a necessity, I have found most clients do not understand their coverage. The differences in wind, water, flooding or hurricane coverage options in policies can be very confusing, especially when reading the legal language in policies; but please advise your clients that the cheapest option is generally not the best. The most important thing to know about insurance coverage is “Will the company pay the claim when you need them to?” Therefore, I highly recommend sending your clients to the following sites: JD Power Homeowner Insurance Company Rankings, National Association of Insurance Commissioners (NAIC) and The American Association for Justice “10 Worst Insurance Companies” to see if their coverage will be more about litigation than rebuilding come the next disaster.      

Danger No. 4: A Death in the Family

The fourth area of concern is the death of a family member. While such an occurrence is highly emotional in and of itself, when you add in the loss of a house, car, clothes, food, job, and items such as family heirlooms and photos from the effects of a disaster, and the emotional toll can be overwhelming. For most people, just trying to clean up, determine where to live in the short-term, and then rebuilding, is enormous. Compound that with the task of probating a family member’s will or just trying to find out if there is a will and it can be more than most people can handle. 

Such events create more questions than answers. What assets does the family still have? Did the storm revalue those assets overnight? Do the insurance claims have to be filed after the probate process starts for those damaged assets owned by the deceased? Is the claim check paid to the estate of the deceased? Does the will cause family issues of inequality for one family member that was deemed to inherit property outright, which is now completely demolished, while the other family members inherited all cash? Do we even have the deeds, titles or a summarized listing of all the assets owned before disaster has taken its toll? 

Issues of concern with the death of a family member can feel endless and are very emotionally charged. Therefore, not only does disaster planning include disaster supply kits, identity theft protection and insurance coverage prudence, but estate and wealth transfer planning with all the associated legal documents. This is a vital part of personalized disaster planning, because at the end of the day, any sudden death is a disaster to the family. 

If most advisors help plan and manage clients’ portfolios as it relates to a client’s goals and objectives, the need for risk management shouldn’t stop at the investment portfolio. A dialogue with your clients explaining that the financial planning process is a form of personalized disaster planning is a differentiator for sure.  If there is never any discussion related to risk management, the question becomes this : What is the true risk exposure of your client’s whole portfolio when calculated for a real disaster situation?  Risk management involves not only a client’s portfolio risk, but the risk of their changing life situations, such as future income or principal needs from their portfolio. Therefore, the better you as an advisor manage the risk of a personalized disaster situation for clients, the better you indirectly manage the overall risk to their financial position. 

In my last article in this series, I will look at providing simple. achievable recommendations for helping your clients achieve their own personalized disaster plan. 

See all three blog postings by Andrew Rice on how to build a personalized disaster plan for clients.