The night of Saturday, August 27, 2011, I was semi-hunkered down. Hurricane Irene was in the general, but not the immediate area, of my town, Lambertville, NJ. Heavy winds and rain were expected, but flooding from the Delaware River was not in the forecast. Riverside residences and businesses had suffered in a big way from three, recent “100 year floods” – September 2004, April 2005, and June 2006. But our 1867 row house was many blocks from the river, at the base of a plateau that rose to the east of town.
The hanging outdoor planters and porch furniture were secure. The batteries in the three basement sump pumps were charged. I was settled in with snacks and Season 2 of “The Wire” (a DVD in those pre-streaming days). The night, I assumed, would be interesting, and maybe exciting enough to produce some good cocktail party chatter in the months to come.
At midnight, the sump pumps kicked in and “The Wire” continued to fascinate. At 1:00 A.M., in quick succession, the electricity went out, the pump batteries died, and the sound of automobile ignitions filled the neighborhood. I looked out the window to see lumber and debris floating down our street as cars navigated the rising waters. I wasn’t that interested in a TV show at that point.
A completely unexpected and unanticipated event had overtaken us. The controls of the town reservoir – located on the plateau above town – had malfunctioned, cascading water into the town and my neighborhood. Standing in 2 ½ feet of water in the basement, watching a refrigerator and boxes float by, was a huge comedown from “The Wire”.
Now, did I have control over the weather? Did I have control over the company that operates the reservoir? No on both counts. Did I have control over the strategy and mechanism that would protect our finances in the event of loss? Yes, absolutely. The strategy was asset protection and the mechanism was property insurance.
Asset protection may be the least jazzy area of financial planning. But it is the area where we can most easily both identify a risk of financial loss, and take steps to mitigate that loss. Whether you are protecting your finances from loss or destruction of property; from loss of income; from premature death; from medical expenses; or from liability judgments, you can take control of the mechanisms that can provide the needed protection.
In my case (and giving credit where credit is due), it was my wife’s idea to secure flood insurance for our property, even though we were not situated in a flood plain. That insurance would protect us in the event of loss from water-caused events, like broken pipes or a rising water table. The very reasonable cost of the coverage ($200 a year at that time) compared to the financial cost resulting from a water-related disaster made the decision an easy one. Therefore, between our property insurance and our flood insurance coverages, our financial loss from the flood was minimal. The replacement costs of our HVAC unit, water heater, refrigerator, and personal property were met by insurance payments.
And, to underscore the point: we could not control the occurrence of an unpredictable event, but we did control the financial impact of that event.
Which reminds me, I still need to take control and finish that season of “The Wire”.
