Should Recent Weather Events Impact Your Emergency Fund?

You have all seen it over the past week.  The devastation that wrecked Asheville, NC, amongst so many other areas along Hurricane Helene’s pathway.  The destruction was truly apocalyptic.  The majority of Asheville’s downtown is submerged under nearly ten feet of rushing waters.  Whole rural towns were wiped off the map. Many are without food, water, or power for the foreseeable future. 

Though severe weather events like this used to feel like a ‘once in a decade’ tragedy, they are, statistically speaking, becoming more and more common.  This week, amid this chaos, I wanted to circle back to our emergency fund recommendations and determine if these should be re-evaluated.  Should recent weather events impact your emergency fund?

Hurricane Helene’s Legacy

If you are anything like me, you have been glued to your television or smartphone with the ‘flood’ of pictures and updates steaming in regarding the devastation left in Hurricane Helene’s wake.  As a resident of the southeastern United States, I am no stranger to severe weather events, especially hurricanes, storm surges, and flooding.  It happens.  However, I have not seen destruction like this since Katrina. 

Though I consciously understand that many hurricanes batter the U.S. East Coast and the Gulf each year, Helene, much like Katrina, was a grim reminder of how fragile our society is.  Though I do not mean to descend into the ‘doom and gloom’ of everything, our lives can change on a dime.  Storms can grow quickly and unexpectedly.  Tornados can strike down on a moment’s notice, and flooding can devastate our infrastructure.  Further, going beyond just a few days without power can begin to genuinely pressure the very fabric that holds our society together. 

Many who follow this blog know that I reside in South Carolina. Though my area was not dramatically affected by the hurricane, it did cause flooding, which is not uncommon. However, I have a number of friends and colleagues who live in the western part of the state and portions of western North Carolina, and some of the stories coming out of that area are truly horrifying.  

Wiped-out grocery stores, medications unfilled, spoiled food, hours-long lines for gasoline, and impatient citizens pulling firearms on each other, escalating tensions in an already tumultuous time.  Society is fragile, and with an expectation for more frequent severe weather events, I fear more stories like Helene’s will become all too familiar. 

What Can We Learn From This?

Is there anything to be learned from all of this?  Perhaps the lesson lies in collegiality, comradery, and helping your fellow man.  However, this is a personal finance blog, and for me, it goes beyond that.  Helene highlighted that even wealthy communities and well-financed and well-educated populations can be caught off guard and devastated.  Low and high socioeconomic classes alike, no one is spared.

All this coverage made me reflect on my own emergency fund. So, I started listening to podcasts and videos about filing flood insurance and homeowners insurance claims. I wanted to know how long the process takes, how quickly you can get financial relief, and how often you have to hire attorneys to help you receive an appropriate payout.

Unfortunately, this led me down a path of unpaid claims, hurricane horror stories, and insurance company fraud.

Though we all hope our insurance claims process is efficient and adequately reimbursed, we all know that there is a financial incentive to pay as little as possible for each filed claim.  In the wake of a hurricane as devastating as Helene, tens of thousands of individuals are likely filing claims, surely totaling billions of dollars.  The latest estimates suspect Helene caused nearly $35,000,000,000 (35 billion) in damages. 

If all of these claims were reimbursed in their entirety, many of these insurance companies would go bankrupt.  As such, do not assume you will be paid what you feel you deserve.  I do not mean to paint such a grim picture, but I want to provide a healthy dose of realism. 

As I consider all these confounding factors, I am left to contemplate my own scenario.  If our family were to evacuate for a severe weather event and return to find a completely destroyed home or town, what would that look like financially? 

Going Through The Motions

For starters, I would immediately take pictures and document the damages. I would then subsequently file a claim with my homeowners and flood insurance. In the meantime, I would likely have to stay at a hotel, AirB&B, or with my parents. Assuming my hospital is still standing, I would obviously continue to work my job as best as I could to continue to bring in income. However, one is still expected to pay their mortgage even if their home is destroyed. 

Secondly, while we wait for the claims process to begin, we would likely spend more money eating out and purchasing essentials like clothing and other necessities, given that, in this hypothetical scenario, all of our belongings are destroyed. 

Many may need new computers to work remotely; maybe a car was also totaled (filing a claim for this, too), childcare is still needed, perhaps you have to employ a lawyer to help you receive what you feel your claim is owed, etc.  These expenses add up quickly, likely wiping out your emergency fund much sooner than expected.  Now, this is the very reason for an emergency fund, but would your savings be enough? 

Though my prior estimates had me feeling safe, after recent events… I am not so sure. 

Common Emergency Fund Recommendations

I am no stranger to writing about emergency funds.  I think they are largely the first and most important aspect of financial security.  One of my first articles ever written on this site was titled: Emergency Fund: Your First Financial Goal.  It has aged well I believe.  Many of the recommendations I wrote about back in 2022 remain the same. 

What are these common recommendations, you ask?  Let’s review what so many in the personal finance community (including myself) have recommended:

• An emergency fund should house at least three (3) months’ worth of living expenses. 
• Budgeting for living expenses should be comprehensive (mortgage payments/rent, student loans, groceries, utilities, childcare—every. single. monthly. expense).
• An emergency fund should be used for emergencies only (car wreck, unemployment, unexpected healthcare expenses, etc.)
• When money from an emergency fund is used, its replenishment should be a top priority
• The money should be housed in an easily accessible and protected account (e.g., a high-yield savings account or money market account).

As you can see, the recommendations are relatively straightforward.  Save money to cover all your monthly expenses, house it safely, and only use it if needed.  Simple. 

It is common practice for the personal finance community to recommend this as the first priority for anyone looking to harness sound financial habits. An emergency fund covers most unexpected things, and for all other assets, you purchase insurance coverage (life insurance, disability insurance, homeowners insurance, flood insurance, malpractice insurance, etc.).

Hurricane Helene has highlighted the gaps in asset protection or the unfortunate chinks in our insurance coverage’s armor.’  Why would anyone in Asheville, NC, have flood insurance? I am sure the overwhelming majority of residents have homeowners’ insurance—that is a no-brainer—but I would be surprised if flood insurance is mandatory like it is in many of the coastal cities where I reside. 

Secondly, and more unfortunately, I think the scale and speed Helene demonstrated highlights how fragile even our insurance system is. True, insurance companies are legally required to hold a certain amount of accessible money for events that subsequently lead to a high claim volume. However, for areas like Florida, these storms are becoming all too common. 

Many larger insurers are no longer offering coverage to certain portions of the country with statistically higher severe weather events. For the remaining insurance companies, these events can lead to unacceptable amounts of claim depreciation that sometimes spill over into fraud. This can leave the homeowner liable for most damages. 

Should Recent Weather Events Impact Your Emergency Fund?

So, should recent weather events impact your emergency fund?  Honestly, I think yes. 

Though I do not wish to fearmonger and hope that storms like Helene are rare, time has demonstrated that this is not the case. Hurricanes and other severe weather events (tornadoes, flash floods, wildfires, etc.) are becoming increasingly common, and unfortunately, this is coinciding with higher insurance premiums or loss of coverage. This can lead to prolonged claim processing time, insurance incentives to lower payouts, or even litigation. 

These outcomes are costly. Many do not think about or factor this in when saving for emergencies. Sure, rationally, we think our air conditioning unit may fail, a car could get totaled, or we might change jobs and lean on our funds for that transition. 

I am not sure anyone expects to be stranded without the expectation of basic goods like housing, water, or power for the unforeseen future.  This would likely chew through your emergency fund savings far quicker than you planned. 

6-12 Months Living Expenses

As such, I will begin to recommend that emergency funds cover at least six (6) months’ worth of living expenses and may range to as high as 12 months (one year) for the most risk-averse. 

I understand that, for most physicians, this is a massive amount of money.  Many would argue that six-figure savings should be housed in an investment vehicle that can generate more interest.  I do not completely disagree.  However, understand that if you house an emergency fund in an investment account, it is subject to the market’s volatility, for better or worse. 

Take Home Points

Before we close out, I want to be clear: This article does not intend to make light of the disaster that has unfolded in the wake of Hurricane Helene.

What I have seen in parts of Georgia, South Carolina, North Carolina, and Tennessee is heartbreaking.  However, with many tragedies in life, there is (hopefully) something to be learned.  Financially speaking, we now must grapple with the fact that we live in a world where severe weather events are becoming more common.  As a result, you are statistically more likely to suffer from one.  Re-evaluating all aspects of your emergency plan, including how you save financially, is critically important.  Luck is where preparation meets opportunity.  Be lucky when disaster strikes. 

I hope none of us have to suffer the damage and repercussions of such storms, but the truth is that some of us will. I personally am taking the time to consider my financial needs, given that I reside in a coastal town, and have determined that I need a bigger buffer. What do you think?

If you are looking for ways to help victims of Hurricane Helene, I found this article helpful.

Stay motivated!

The Motivated M.D.

Standard Disclaimer: None of the information on this website is meant as individualized financial or medical advice.  These posts may contain affiliate links.