June 1st ushered in the 2018 Atlantic Hurricane season and the question on everyone’s mind – especially those living along the east coast – is whether this year’s hurricane total will approach last year’s record-setting season. Especially since the 2017 Hurricane season will be remembered as one of the busiest and most destructive seasons of all time, with 17 named storms – including Hurricanes Harvey, Irma and Maria – that altered parts of Florida, Texas, Louisiana and the Caribbean forever.
2018 Hurricane Forecast
According to the Weather Company, 2018 is forecast to be less active than average. But the forecast still calls for 12 storms – with 7 hurricanes and 3 major hurricanes (above a Category 3) predicted – not exactly cause for celebration.
Make an Emergency Plan
Unfortunately, it often takes disaster to remind us to be prepared. For those escaping the storms, we should both thank our lucky stars but also ask: How ready are we if a disaster strikes again, on the scale of Hurricane Katrina, which caused over $125 billion in damage?
Having an emergency plan in place is critical, no matter if it’s for a family or just a single individual. Do you have the proper medical supplies, extra batteries, bottled water, etc.? Beyond those immediate measures is how prepared you are financially to weather a catastrophe.
Financial advisors often suggest to clients that they maintain some liquidity with their assets. Sometimes you need to get to cash quickly and having all your eggs in one place is never a great idea. Tying up all of your capital in an illiquid asset, like a house or business, can leave you and your family potentially stranded in times of distress.
Some folks not harmed directly by the storm may think: That’s what having insurance is for, isn’t it? Sure, your flood insurance likely covers water damage, and you can probably file a claim on your homeowner’s insurance for the damage to the roof, right? For many, these are the types of big-ticket what-ifs to think about when planning for weather-related tragedies. But small practicalities loom large when a disaster disrupts our day-to-day functioning.
Think About the Little Things
Beyond the big what-ifs, think about some other issues that will impact your life too. For example, many stores may not take credit cards, so you should have cash available for things like food and clean water.
A good rule of thumb is to have three to six months of household expenses saved in a bank account. And because bank ATMs may not be working, having one to two weeks of cash on hand is a good idea.
Risk management is far more than just buying an insurance policy. Risk management is understanding the risks you incur and properly preparing for them, regardless of how remote they first appear.
Risk Management 101
Remember, you can’t insure for everything. But you can better understand the risk you are exposed to, and in simple terms, you can then take one of four courses of action. You can:
- Retain the risk and let life play out, hoping for the best.
- Reduce the risk by creating and testing your emergency plan.
- Avoid the risk by not living/working where hurricanes are likely to form.
- Transfer the risk by purchasing an insurance policy, if available.
The key is truly understanding what risks exist in your life and covering the highest probability exposure, as well as the least likely but most devastating possibilities.
Remember, it’s ok to retain some risk, because you simply can’t eliminate all of it. But with a few steps, you can dramatically reduce your risk profile.