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Alert: Most Americans Unprepared to Cover Cost of Emergencies

Posted On March 06, 2019

Despite an increasing frequency in weather-related natural disasters ranging from wildfires in California to hurricanes in the Southeast, many Americans are financially unprepared to cover the cost of emergencies.  Personal finance website GoBankingRates.com, compiled a list of the average cost of eight emergencies based on data from the Census Bureau, FEMA, HomeAdvisor, Insurance.com, and other reputable sources.  The calculations reveal that emergencies are more expensive than Americans anticipate, and many Americans are woefully underprepared.

An American Express Survey found nearly half of respondents were hit with an unexpected expense in the past year, namely car trouble, medical issues, and home repairs.  Bankrate reports 23% of Americans have nothing saved for emergencies, 22% have saved less than three months of income and 18% have saved 3-5 months, and only 29% have saved more than six months or more. 

 

Average Cost of Common Emergencies

Event

Cost

Data

Job loss, government shutdown, furlough

$28,824

Based on 6 months of median income

Flood

$26,807

Based on cost to home and personal property, considering most homeowners’ insurance policies do not cover flood insurance.

Fire

$12,635

Based on the national average homeowners pay for the cost for repairs, out-of-pocket charges vary based on insurance provider

Sudden Death of Family Member

$10,833

Based on funeral-related costs

Hurricane or Tornado

$7,232

Based on the national average homeowners pay for the cost for repairs, out-of-pocket charges vary based on insurance provider

Earthquake

$4,529

Based on the national average homeowners pay for the cost for repairs, out-of-pocket charges vary based on insurance provider

Medical Emergency

$1,322

Based on the average out-of-pocket cost, may vary based on insurance provider

Car Accident

$775

Based on the average out-of-pocket cost

Source: GoBankingRates.com

 

Many factors have hampered Americans’ ability to save, such as years of stagnant wage growth, post-Recession woes, and record-high student debt.  Depending on your financial circumstances, it may not be possible to save for every potential emergency.  However, there are ways to be better prepared. 

When you are taking out an insurance policy, do your due diligence.  Find out what is covered and what isn’t covered ahead of time and be prepared to cover your deductible.  When you are buying a home, compare loan and down payment scenarios.  Opting for a lower down payment loan program, could allow you to save more for any home repairs that you may need to cover during your first few years of homeownership. 

If you are a homeowner, get familiar with the ways you can access your home equity in times of need.  Once you’ve built at least 20% equity in your home, you can access that value through a cash-out refinance.  Keep in mind, that any refinance is a new loan origination and with that comes origination fees like closing costs.  If you are considering a cash-out refinance to cover an expense, let me know and we can review your best course of action. 

 

Sources: MarketWatch, MarketWatch