DESIGNING YOUR PERSONAL BACKUP SYSTEM
The problem: Following a catastrophic loss, how would you go about documenting your property losses, so as to collect full replacement value from your insurance company? If your home or office were destroyed, records contained there could also be destroyed. Your best protection would be to have backup copies of receipts and photographs stored at a remote location.
There are only two locations that I recommend for your personal backup system.
1. Safe deposit box at your local bank.
The safes are contained in a fireproof steel vault. If anything survives a catastrophic event, the vaults will.
Imagine total local destruction except for a solitary steel cube left standing among the rubbish. That's the idea behind the way the vaults are built. Still, the banks will tell you there is no sure thing.
The vault is opened by combination lock. The bank has one key to your box (stored inside the vault) and you have the other. Both keys are required to open your safe. If your key is lost, the bank will have a locksmith drill it open after you have identified yourself. You may encounter a delay in getting into your box, but the contents have a good chance of surviving.
The advantage of using the safe deposit box is that your records are easily accessible on an ongoing basis. All you have to do is drive to the bank. And you have complete confidentiality.
It is preferable to have your safe deposit box listed in the name of your business, with both spouses having access to it. Personal safe deposit boxes are "frozen" in the event of death; business boxes are not.
Certainly, stock and bond certificates and anything else with a marketable value should be stored in a safe deposit box.
2. Remote third party location.
Another good choice for everything except securities and other valuables. It avoids all the known and unknown risks and potential chaos associated with the disaster area.
The idea here is for you to assemble your own Financial Care Package of key personal and financial records and place it in the care of a trusted friend or relative who lives at least 200 miles from where you live.
In the event that your home or office files are destroyed, you can access this package to activate and prove your insurance coverages and document the values of lost or damaged property.
Choose someone you trust and then don't worry too much about the confidentiality of your information. The key thing is the protection you are gaining.
Place the various items in manila envelopes, label and seal each one. Then seal the whole package, mark it CONFIDENTIAL and put your name on it. Finally, instruct your caretaker not to open the package except upon instructions from you.
I will briefly address three other approaches that I do not recommend.
1. Reliance on your insurance agent.
It's probably a very good idea to send copies of major receipts to your insurance agent, but I would not rely on this as my backup system. First, your backup needs extend well beyond the insurance area. Secondly, in the event of a catastrophic loss, do you want to be dependent upon your agent's record keeping and filing systems?
2. Do not keep backups at the office.
In areas at risk for earthquake, do not rely on home backups that you keep at the office, and vice-versa. Both home and office could be damaged at the same time.
3. Fireproof safes aren't totally foolproof either.
They're supposed to be good for a certain number of hours - but extensive fires have been known to burn beyond those limits. Such was the case in the Berkeley-Oakland fires of 1991.
I recommend that you use a safe deposit box for all securities and other valuables, and either a safe deposit box or remote third party location for other records. If you really want to be safe, store backup records at more than one place.
Regardless of your location choice, you absolutely need to assemble or update your Financial Care Package right now.