Personal finance expert Tony Steuer will help you prepare your money for nature’s worst.
Caption for header image: Neighborhoods in Houston and its suburbs faced extensive damage from flooding after Hurricane Harvey in 2017. Credit Karl Spencer via iStock.
Tony Steuer is a financial preparedness advocate, insurance expert, and author of several books about understanding insurance. In his new book, Get Ready! A Step-By-Step Planner for Maintaining Your Financial First Aid Kit (2019), Steuer provides readers with the organizational advice and practical steps needed to secure financial information in the event of an emergency.
As we work to reverse climate change, it’s also important that we survey our natural environment and do our best to prepare for climate events. Green America’s Sytonia Reid interviewed Steuer on the relationship between climate change, insurance, and financial preparedness.
Green American/Sytonia: You mentioned in Get Ready! that a first aid kit is something that people hope they’ll never have to use but when the time comes, they’re glad they have it. Are there things you do to make people feel more comfortable with getting financially prepared for an emergency?
Tony Steuer: I think the key is that people are intimidated by things they don’t understand, and it helps to believe you know something and are in control. Information in the financial services industry tends to be overly complex, so it’s especially important to have resources that explain financial information in a way that the average person can understand.
Green American/Sytonia : Most people can predict that when disaster strikes they may have to pay for home repairs and maybe an extended stay at a hotel, but are there other financial costs associated with emergencies that people may not realize?
Tony Steuer: One of the main things is that it may cause a disruption of work, and that the person may have to work something out with their employer so they can take care of private matters like looking for a place to live, filing insurance claims and shopping, or if you’re able to rebuild your house, that means you’ll have to oversee that process. So it can get really complex and time-consuming in terms of all the things people have to take care of.
Green American/Sytonia: How is climate change affecting the insurance industry?
Tony Steuer: Climate change is a macro-level issue for the industry, meaning that it’s leading to more practices that will affect the whole industry because the insurance companies will ultimately have to pay money for repairs. So they’re trying to figure out how to accurately price homeowners insurance policies, earthquake policies, flood policies, and the whole gamut to take into account the fact that there are larger claim incidents occurring much more frequently than they used to. With wildfires, the insurance industry is looking at adjusting rates in the future, which will effect consumers.
Insurance companies, county governments, and safety inspectors are also taking a serious look at where people are building or rebuilding their houses and what enhancements are being put in place in terms of fire safety.
Financially speaking, premiums will probably increase, and we’ll see a more concerted effort to build homes that can survive climate events. There may potentially be more restrictions to rebuilding in areas prone to natural disasters.
Green American/Sytonia: Are there certain types of insurance policies that are especially helpful for people who live in areas vulnerable to climate events? For example, those who live on the Gulf Coast and have higher chances of weathering hurricanes?
Tony Steuer: Definitely. I think something people don’t realize is that there are homeowners insurance policies that may not cover certain events like flooding or earthquakes.
People tend to buy the insurance that they’re sold rather than taking a look at what their actual risk is. There’s a mismatch between what people think is covered and what actually is covered, so people should take a look at supplemental policies that take into account their actual risk.
Green American/Sytonia: Where can people go to find out their actual risks based on where they live?
Tony Steuer: When you buy a house, your real estate agent gives you piles of disclosure packets, which have a lot of information about the foundation your property is built on, like its soil and sedimentary qualities, its structural components and environmental hazards. I think that’s a good place for homeowners to start because it can save you a lot of time on research.
For renters, it’s trickier because nobody will hand you that information. You can start by looking at risk maps and researching what natural disasters your area might be prone to. Google your city name and “natural disasters” and see what pops up, and talk with people who’ve lived in your area for a long-time to find out what’s been historic.
Green American/Sytonia: I live three blocks away from a designated flood zone. Considering the threats climate change poses, could current risk maps be optimistic?
Tony Steuer: Many of these risks maps are averages, and when you have an average, it means there’s good chance of over- and under-estimations. One of the first things they teach you as a first responder to an emergency is to make sure the scene is safe so that you don’t become a second victim. So the point there is that if there’s a possible or likely risk, it’s best to protect yourself against that risk. The flood doesn’t see the designated risk map. It just floods.
Even people who aren’t convinced that climate change is real can see there’s been more intensified natural disasters. In the investment world, there’s the saying, “historical performance does not guarantee future performance” and I think that applies here. Just because you may be in a zone that hasn’t flooded in 100 years, doesn’t mean it won’t flood this year or in the future.
Green American/Sytonia: It was exciting to see that Get Ready was designed to be applicable to people in all stages of life. But from another angle, are there ways in which getting financially prepared for a disaster would differ for people across different economic backgrounds?
Tony Steuer: When running a home, you’re essentially managing a micro-business, and whether you’re making minimum wage or several million dollars a year, every business has income. And then there are expenses, from rent or a mortgage and car payments, all the way to a second home or private plane.
We all have the essential task to keep our expenses less than our income. And just like any business, our home businesses have to pay taxes, get insurance, and pay for healthcare.
What I’ve found interesting is that it doesn’t seem like when people make more money they’re more likely to be financially set in an emergency. They may have more cash in their bank accounts, but it gets back to being financially literate. Regardless of income or education level, we all face the issue of understanding our money.
Green American/Sytonia: Have you completed the Get Ready! planner yourself?
Tony Steuer: I’ve got portions of mine complete. I’m going through it and taking notes of any places where I get stuck, so that I can share my experiences and more tips with readers. People who have questions are always welcome to contact me through my website where they can also take a financial preparedness quiz and receive a personalized report when they’re done.
[Editor’s note: Steuer’s book is a workbook to complete, not an explanation of insurance and financial planning concepts. We recommend talking to your insurance broker or financial advisor for specific personal questions, or finding a socially responsible financial advisor at GreenPages.org.]