The risk of losing everything is very possible with the current heavy rains all over the country.There have been reports of severe flooding which has destroyed property and taken lives leaving families devastated and financially ruined.
Insurance is the easiest way to cover yourself for this potential loss. Insurance is necessary if you do not have sufficient capital to replace the loss. While it is expensive if you never claim, if you do have a loss it remains the best value for your money.
Many South Africans are not insured, and then you have to carry your own risk. You will need to assess the replacement value of your property very carefully, and make a plan to provide for the potential loss. You can conduct you own cost/benefit analysis and choose to set aside an amount which you would have paid to an insurance policy - and save it yourself.
Emergency Fund
The starting point in any sound financial plan is a contingency fund for emergencies. The larger this fund the lower the risk you run of not being able to replace your property.
Many people try to self insure this way. Saving extra cash in your bond or money market account is ideal. If you are a victim of a flash flood you can access this fund easily to replace your household items. You may be able to salvage some things, but you need to understand the financial impact should you lose everything.
Prioritise Your Inventory
Draw up a detailed inventory of all your belongings at current replacement costs. Prioritise the more important items such as fridge, stove… as these are essentials for the family over and above items such as the TV and sound system and will have to be replaced first. So aim to save up for these items first.
Having provisions in place for an unforeseen life changing events is what financial planning is all about. Catering for the short and long term will provide you with the peace of mind that you and your property are protected no matter what disaster may come your way.
Listen to the audio below for more information...
Read more from Paul Roelofse at www.investforlife.co.za
This article first appeared on 702 : What to do if you have experienced flood damage in your home
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