How To Protect Your Finances During Fire Season

If you turn on the news today, you will likely see a ton of reporting on the various wildfires raging across the Southwest.  The Tick Fire in Southern California has spread across 4500 acres, and is only 5% contained (as of writing this). Having to flee your home during a forced evacuation may be frustrating, but has nothing on the stress of your home burning down.

How would you cope if your home burned down? Would you want to rebuild or relocate? How would you pay this life-altering move? Use the current wildfires as an opportunity to make sure you have the appropriate home owners insurance or renters insurance. Protect your family’s finances from the devastation a wildfire can cause.

I had the pleasure of sitting down the ABC 7 News Los Angeles to discuss making sure you are properly covered financially from the threat of fire.  Sadly there is no insurance for the emotional toll a house fire will bring into your life. Give this video a quick view.

Video Courtesy Financial Planner LA ABC 7 News.

Fires and Celebrities in Malibu:

This past season on the Real Housewives of Beverly Hills, we saw Denise Richards evacuate her family from beachfront home in Malibu. Later we also saw a friend of the show Camille Grammer complain how miserable the experience was for her when one of her several homes burned down. She literally complained that she had to buy a used Burberry jacket. The horror, she didn’t even have time to get a vintage Burberry jacket, which I’m told is much better. Granted, we are living in California, so I think we will be OK with a light sweater most of the year.

How Big of an Issue are Wildfires?

If you hadn’t heard, the 2018 wildfire season was the deadliest and most destructive the state of California has ever seen. A whopping 8,527 fires burned an area of about 1.9 million acres.  Insurance claims related to the fire season had reached 12 billion dollars by May 2019. Much of this cost was related to the Camp Fire in Butte County.  Wildfires continue to be an issue well into 2019.

Do You Have Money For A Fire Emergency?

A staggering 63% of Americans say they would be unable to pay for a $500 car repair or a $1000 hospital emergency room bill, according to a survey from bankrate.com.

How would these people fund a few nights in a hotel, if they had to evacuate their homes? Any actual damage from fires would make a $500 car repair look cheap by comparison. This is even with the best homeowners insurance, coupled with a low deductible. Would you be able to shoulder the costs? If you had to evacuate, where would you go?

Related: How Much Car Payment Should You Take On?

The LA Times has reported that the average home has over 300,000 items in it. Take their word for it, trying to count that high will take forever. That being said, you should remember that the typical home insurance policy will only reimburse you for the current value of your household items. That new iPhone you are leasing may be worth less than you owe on your lease.  Probably not the best example, as the iPhone is probably the first thing we would all grab, in the event we needed to evacuate. Hopefully, you get the point, most of your stuff is not worth what you paid for it.

The reality is that most of the stuff you own is worth pennies on the dollar compared to what you paid for it. You will need to replace so many things, from couches to clothing to kitchenware. This will not be a small amount of shopping.

To help make sure you get reimbursed for as many of those 300,000 household items you have lost, pull out your iPhone and document all of that stuff filling up your home and your garage. Take the extra time to scan all of your receipts, warranties, and other documents you can’t afford to lost (passport, birth certificates, living trust, or will). Most importantly here, make sure items are backed up into the cloud. This leg work won’t do you any good if the backup drive burns up in the fire.

Over the years as a Financial Planner, I’ve worked with several people who were victims of natural disasters. While not a cure-all, just having appropriate Home Owners Insurance should make it a little bit easier to bounce back from. Make sure you have the right insurance to protect finances from fires.

Related: 10 Tips To Improve Your Overall Finances

This post first appeared on Forbes.com. To see the original, click here.