Are your clients equipped to deal with an unexpected calamity?

Read on to find out how advisors can prepare clients for any unexpected calamity.

A calamity can come in any form – earthquake, hurricane, flood or fire. The recent Nepal earthquake left many homeless and resulted in a huge loss of property. It is only after a disaster strikes that we think about the loss.

In this article, we will look at how advisors can prepare their clients in advance to protect themselves and their loved ones from any calamity.

Emergency fund

To begin with, advisors say that one must have an emergency fund equivalent of six months of your normal household expenses to tide over any contingency arising from the calamity such as hospitalization, loss of business.

Documents

Make sure that your clients have easy access to important documents like insurance policies, driving licenses, identity card, birth/death certificate and even bank account numbers if they have to vacate their house immediately. It is advisable to keep such documents at a place where they can be easily located. Advisors say that people can also keep such documents in bank lockers.

Get insured

“People must first do insurance audit, which means calculating how much insurance is needed to protect their family from any tragedy” says Nikhil Kothari of Etica Wealth Management.

If your clients already have earthquake or fire insurance, it is best to review it once. Finding out the latest value of the property and belongings will help you estimate the quantum of insurance required.

Life and accidental insurance policies

A calamity can claim people’s lives or can leave them disabled. “Getting insured removes the financial burden from the people to a large extent when they are affected by any tragedy or in case of any emergency. They must buy four policies - term policy, health insurance, personal accident policy and critical illness policy,” suggests Nikhil. 

Home insurance

One of the biggest losses which occur in a calamity is the loss of a property. “For Indians, home is associated with the sentiments of the people. Therefore, buying cover for fire insurance or any cover against earthquake is necessary,” suggests Rajesh Hattangady of THiiNK.

Maintain records

It is advisable to keep a record of all belongings which will help clients settle insurance claims fast. 

A report by US based financial services company Wells Fargo Advisors recommends “When time comes to settle your homeowner’s insurance claims, it helps to have a thorough record of your home’s contents. There are two ways to maintain your inventory - using photography or videotape and maintaining a written list. Of course, if you want to be thorough, you can do both.

Taking photos of your possessions or videotaping them is the easier of the two methods. If you choose to videotape, use the soundtrack to describe each of the items. Be sure to include shots of your cars, the contents of your garage, closets, drawers and basement as well as of the outside of your home. The photos, negatives, tape or computer disk should be stored in your safe-deposit box or emergency kit. 

The more difficult method is to make a list of your possessions, including brand names, model and serial numbers, and purchase prices and dates to make it easier to estimate their values for insurance or tax purposes. You may find it easier to keep your list organized by room. Computer software is available to help organize the job. Some items, such as jewelry and collectibles, may require a professional appraisal. Your insurance representative can help you determine which items to have appraised. Again, the physical list or computer disk and copies of any appraisals should be kept in your safe-deposit box or emergency kit.” 

Give examples

Generally, clients are not inclined to buy insurance unless a tragedy strikes. Thus, advisors need to give examples of hardships faced by victims of a catastrophe so that clients can relate to the problems faced by others.  “To educate a child, you give examples to make them understand better. Similarly, advisors have to enlighten people and give examples while explaining to clients,” suggests Rajesh.

We hope the points listed above help you draw up a disaster management plan for your clients. Let us know your views.