Saving for a Rainy Day
When a natural disaster strikes, be prepared to foot the bills until your insurance company settles the claim
In my business, people usually don’t call unless they’ve got a big problem. That was the case when a doctor phoned us in a panic after his office burned down. The insurance company sent an adjuster right out, but the doctor was told that the payout would take several months. Naturally, he wondered what he was supposed to do to continue treating his patients in the meantime.
“Well,” I said, “just rent another office and work from there until the process plays out with the insurance company. Don’t worry. You’ll get reimbursed.”
Silence. Then the doctor sighed and said, “They didn’t tell me I could do that.”
I wasn’t surprised. Many insurance companies won’t tell you about all the benefits you are entitled to, which is why I recommend going with a reputable independent insurance agent who will look out for your best interests. In any case, the doctor had a credit line sufficient enough for him to rent space across town. He was quickly back in business. The insurance company reimbursed him for the cost.
Many small businesses, condo associations, and individuals don’t understand that most insurance companies are notoriously slow to pay up. In the past, claims were usually paid within thirty days. Now the payout process can take anywhere from six months to a year. You’ll get your money eventually, but you’re on your own until the claim is settled.
Most people don’t factor the lag time between filing an insurance claim and actually getting paid into their insurance planning. Yet, it’s important to do so. That’s why I recommend preparing your finances, either personal or business, to weather the proverbial storm.
For individuals, preparing your finances for a natural disaster that may never come is problematic. Many people live paycheck to paycheck, have little or no savings, and have maxed out credit cards. Research shows that it can cost a family of four more than $1,000 to evacuate their home to stay in a hotel for a few days until it’s safe to return. Some people can’t afford to leave, and so they stay in potentially dangerous locations.
The only viable solution for individuals in this position is to get a credit card, use it once a month to keep it active, and pay off the balance. If you’ve got an open line of credit on your card, you’ll be able to at least get out of harm’s way.
For businesses and condo associations, I recommend opening a line of credit dedicated for use only in the event of a natural disaster and a resulting insurance claim. The money will be available to start the rebuilding process while the insurance claim is settled. What happened with the doctor? He hired a partner to run the new office, and now he’s doing better than ever with two offices instead of one. It just goes to show you. Sometimes good really can come from bad.