Insurance lesson can give kids peace of mind

Early this year, my niece and her 10-year-old son were settling in to watch television when the shrill sound of the smoke detector went off.

It took only a matter of minutes for their lives to be turned upside down. Though shaken, they escaped unharmed, but a fast-moving electrical fire destroyed the house and nearly all of their belongings.

In the aftermath, my inquisitive nephew started asking questions: Where will we live? Will I get my own room again? What about my Legos and other toys?

In my continuing quest to find teachable moments to help improve kids’ financial preparation for adult life, there’s an obvious lesson from my niece’s experience. Make sure your kids understand the concept of insurance and why it’s important to have protection.

In the event of a disaster — whether it’s a house fire, floods or tropical storms — the most effective approach is to keep the conversation with your children calm and explain that everything will be all right.

As emotionally difficult as it might be, stay positive around the kids. For example, my niece said that she and her husband emphasized to their son that he would get new toys, new clothes and a new room.

Depending on the age of your kids and the amount of detail you want to get into, let them know that there’s money to replace or rebuild the damaged house and the swing set and to cover the cost of staying in a hotel or rental home for what could be months.

Insurance is not an easy topic to explain. You might try by explaining that you pay a certain amount of money every month or once a year for protection for your home.

In return, explain that the insurance company promises it will pay a certain amount of money to cover a catastrophic event listed in your policy, such as the cost of rebuilding your home after a fire.

Show your child the policies you have for home and auto, for example. Explain how your plans work, and why you selected the coverage and from whom, if age appropriate.

What financial preparation can you take before a disaster happens? Having a video inventory of your household before a disaster strikes and photos of damages afterward can help speed up the claims process.

As for my nephew, there’s one lesson from the house fire that surely stuck with him: Generosity from friends, family and neighbors has no limits in times of need.

Several weeks after the fire, his fifth-grade classmates did something special. At a class assembly the kids brought him a basket of gift cards, cash, toys and clothes. His best buddies also spoke a few words about him. This was the kids’ idea, not the teachers’.

After they spoke, my nephew took the microphone, thanked everyone and said a few words about his experience. There was not a dry eye in the room.

Send questions to Steve Rosen at sbrosen1030@gmail.com