Beryl, the earliest Category 5 Atlantic Hurricane on record, and the damage it wrought, particularly in Jamaica’s south-west, is a sombre reminder of the importance of planning and preparing for the literal and proverbial storms that inevitably come. When news of Beryl’s approach aired, the response was varied. Some people, fearful of the potential disruptions prepared accordingly, while others held out hope till the 12th hour that the hurricane would change course and failed to adequately prepare.

For a myriad reasons, many individuals lacked the ability or foresight to plan and prepare for the “rainy day”. However, for those who did not experience it first-hand, social media showed the significant post-hurricane damages. The experience with Beryl highlights the importance of having an emergency fund and the value of peril insurance in a crisis. Was your house in order? Were you financially prepared to deal with the costs that did or could have occurred during the hurricane? What are some of the lessons to be learnt about the importance of emergency savings and insurance in Beryl’s aftermath?

Create an Emergency Fund for Small-Ticket Expenses and Temporarily Lost Income

An emergency fund refers to money set aside for unexpected events like job loss, medical emergencies, or disasters like a hurricane, earthquake or fire. Having emergency savings is a crucial component of being disaster-ready. It puts you in a position to cover essential expenses, bills, and small repairs in the short term. Knowing that you have set aside emergency money will enable you to sleep better at night when the unforeseen occurs. Let’s say flying debris during Beryl damaged a window in your house or heavy rains caused significant damage to your crops and livestock. Even a small emergency savings fund could assist with quick repairs, restoring your livelihood, tiding you over and softening the blow of lost income. Moreover, having emergency savings is preferable to borrowing from a relative or over-relying on credit card debt. Credit cards and other forms of debt attract interest charges that you might not be immediately able to repay, resulting in high interest and penalties. Hence, it’s more desirable to use the savings in your emergency fund to cover these costs when possible.

If you don’t have savings at the moment, start by building a small emergency fund. Your target should be six months of expenses, but having enough funds to cover at least a month’s worth of essential expenses like rent, utilities, and groceries is a start. This will provide some cushion to help alleviate uncertainty for your family after a hurricane or other emergency, even if it does not eliminate the financial burden. If you are overwhelmed by different financial priorities or are unsure where to begin, consider speaking to an NCB wealth advisor who can introduce you to money market instruments like repos, money market unit trusts and BOJ CDs. They can help create a personalised emergency savings plan that can provide peace of mind amidst the uncertainty and anxiety a hurricane may bring and offer a liquidity stop-gap until say insurance claims are processed and paid.

Buy Insurance to Cover Big-Ticket Expenses and Permanently Lost Income

While emergency savings can help with minor damages and temporary shocks to income, you’ll need peril or general insurance to cover big-ticket emergency expenses. Having general and life insurance coverage can help you to offset the financial impact of severe damage to property, like a blown-off roof or worse, lost life during unforeseen disasters. General insurance covers losses or damages to tangible assets, such as a home, car, or business, from events like theft, fire, floods, accidents, or man-made disasters. With the recent hurricane, the local media reported an uptick in policyholders seeking payouts from large insurance firms for wind and flood damage to property. If you’ve bought your property using an NHT mortgage, you’re likely already covered by a general insurance policy. However, other mortgage providers may require you to take out property insurance. Regardless of whether you have a mortgage or own your home outright, it is important to buy insurance to cover your property against damage due to hurricanes or other natural disasters. However, peril or property insurance will only cover the replacement cost of the building. Though less popular, homeowners and renters will need to consider getting content insurance to cover personal belongings inside their abode, protecting against damage or loss due to a hurricane.

In addition to the potential for property damage, hurricanes and other disasters are potentially fatal, highlighting the need for life insurance. A life insurance contract ensures that if policyholders die, their family or any other beneficiaries get a payout to ensure they can cover burial costs, pay bills and deal with debt without depleting their savings. Life insurance is often an avoided topic in households, but it provides security and predictability to your financial plan. So if God forbid, a hurricane or other disaster claims the life of a breadwinner who had life insurance, the policy’s lump sum payout could help cover immediate expenses like funeral costs and replace the breadwinner’s income. This will help to ensure the beneficiaries can have financial stability during the crisis, maintain their standard of living long after and plan for the future.

Higher sea temperatures and the El Niño/La Niña phenomena are all factors pointing to an active 2024 hurricane season. In fact, the National Oceanic Atmospheric Administration (NOAA) predicts an 85 per cent chance of an above-normal hurricane season. The unexpected strength of Hurricane Beryl so early in the season is a sobering reminder of the importance of having an emergency fund and insurance to be more resilient to small-ticket and big-ticket shocks. Fortunately, there’s still time to fine-tune your emergency plans. Remember, you can’t purchase insurance during a storm, and by then it would be too late to start an emergency fund. If you do not have sufficient insurance or if you’re thinking about upgrading your coverage, there’s no time like the present. An NCB financial advisor can help you find options to provide a financial cushion against uncertainty.