The start of hurricane season later this week reminds us in the Lowcountry to check our disaster emergency plans, but it’s also a time to review the financial aspects of hurricane preparedness.
Planning ahead will save money and potential heartache, in ways large and small.
To save a little money, shop for hurricane supplies the smart way. I usually start watching for sales in May, knowing that I’ll need to stock up on batteries, bottled water, extra dog food, first-aid supplies and medicine, bug spray and nonperishable food for my family.
If you just make a list and go to the store, you’ll end up paying higher prices for supplies that you could easily get for half-price if you watch for sales.
For example, cases of Deer Park water are half-price at Harris Teeter this weekend, and batteries are on sale, too. Bic multipurpose lighters and Planters peanuts are buy-one-get-one-free at Publix. Drugstores run sales on batteries most weeks (sales start on Sundays), and home improvement stores sell large packages of batteries at attractive prices.
If you wait until there’s a hurricane threat, you’ll not only pay more and face long lines, but you may have trouble finding what you need.
Also, take care to buy things that you’ll eventually use if there’s not a big storm. If you buy hurricane supplies and stick them in a closet until they expire, you’re throwing money away.
It’s usually no more expensive to buy water in cases of 16-ounce bottles than in gallon jugs if you watch for sales, and you’re far more likely to make use of those small bottles later on. Bottled water does have a shelf life, just like that nonperishable food you’re going to buy.
If all goes well, and there’s no hurricane trouble, you’ll end up eating that food and drinking those beverages. In fact, now is the time to check expiration dates on the things you bought last year.
I usually keep items such as boxes of crackers, energy bars, canned fruit, ready-to-eat soup, canned coffee drinks and other essentials in my hurricane supply box. Once the danger’s passed, that stuff moves into the pantry, and new supplies go in the box in May or June.
Of course, if a hurricane does strike, you may have bigger worries and larger expenses to deal with.
That’s why right now is the time to check your insurance coverage, make sure it’s adequate, and understand what your policy means. Also, if you haven’t shopped around to see if you can get a better deal on insurance, now’s as good a time as any.
Two crucial points about hurricane coverage often are misunderstood.
Homeowner’s policies cover “wind and hail” (unless you’re in the “wind pool” area near the ocean and have an additional policy). But those policies don’t cover flooding, which is a major hurricane risk. For that, you’ll need federal flood insurance.
If you don’t know what flood zone your home is in, or want to know more about flood insurance, visit floodsmart.gov. If you have a home with a mortgage, you probably have flood insurance if you’re in a flood zone. But if there’s a hurricane storm surge, being outside a flood zone won’t keep you dry.
Homeowners insurance typically has a special deductible for hurricane coverage. It’s important to understand that if you have a 10 percent deductible, that doesn’t mean you’ll be responsible for 10 percent of any hurricane damage. It means you’ll be responsible for any damage worth up to 10 percent of the value of your property, before hurricane insurance kicks in.
For example, if you have a $200,000 home with a 10 percent hurricane deductible, you’re liable for the first $20,000 of hurricane damage. How would you handle that financially?
South Carolina does offer a tax-advantaged way to set money aside for disaster-related expenses, but it doesn’t make sense for everyone.
Homeowners can set up a “catastrophe savings account” at a bank, and claim a state tax deduction for the money they put in that account. Experience has shown it can be difficult to find banks and credit unions that are aware of the program, but any stand-alone savings account that can be designated or nicknamed as catastrophe savings should qualify.
There are some restrictions and fine print. Visit doi.sc.gov for details.
In most cases, people can put up to $15,000 in a catastrophe savings account. At the state’s top tax rate of 7 percent, that’s a tax deduction worth up to $1,050.
The downside is, while you get an up-front tax deduction, the money then sits in a savings account, and such accounts pay virtually no interest these days. On the plus side, the money’s set aside in a federally insured account, earning tax-exempt interest (subject to withdrawal rules).
The funds can be withdrawn for costs associated with a declared emergency. Otherwise, withdrawn money is subject to a 2.5 percent penalty and must be declared as state income (to repay the prior tax deduction). If you no longer own a home, there’s no penalty, but you do have to declare the funds as income.
People can withdraw the money with no penalty, and don’t have to repay the tax savings when they hit age 70, so these accounts are a financial slam-dunk for homeowners in their late 60s who have South Carolina tax liability.
So, get ready for hurricane season. Pack up the hand gel, don’t forget the can opener, and lets hope we can leave all that stuff in a box until the end of November, when the season ends.
Reach David Slade at 937-5552 or on Twitter @DSladeNews.
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