Dealing with Disaster
In addition to dealing with the logistical and emotional impact of dealing with a disaster, the days, weeks, months and even years ahead can present numerous financial challenges. Unfortunately, getting back to personally evaluate lost or damaged property is just the beginning of a long rebuilding process. Of course, ensuring the safety of you and your family is the first priority, but after your immediate physical needs have been met, it’s time to focus on the steps necessary to recover household stability and your long-term financial well-being. Consider starting with the following tips and resources.
- If you have renters or homeowners insurance, contact your agent or insurance company immediately or as soon as you can start the claims process. Start with how, when and where the loss occurred, as well as a general description of the damage. Ask what steps you should take next. The insurance company may be overwhelmed, so it could take much longer than usual for the adjuster to come out to survey the damage on your property. In the meantime:
- Collect your policy number and a copy of your policy. If you don’t have access to that information, request a copy of your policy from your insurance company.
- Make copies of all documents and any pictures you plan to give to your claims adjuster or insurance company. Document all interactions with your insurance companies, FEMA or anyone else related to helping with the disaster as you go.
- Don’t dispose of any damaged items, especially high-priced items, until the claims adjuster has visited your home.
- If your home isn’t irreparably destroyed, make only the repairs needed to prevent further damage, like covering shattered windows and holes in the roof. The adjuster will need to see the damage, so don’t make extensive repairs.
- Keep receipts for all your additional disaster-related expenses, such as lodging, repairs or other supplies. Don’t forget food costs, additional costs for transportation and storage fees. Some insurance companies offer an advance for these expenses.
- Make a detailed list of the damage as soon as possible, including the value of lost items, where you bought them and their age. It may be helpful to draw a floor plan of your home to help recall what filled the space. If possible, photograph or videotape the damage. Check your list against any inventory you may have created before the disaster occurred, or make a pre-disaster inventory from memory. Repeat this process in two or three weeks, because you’ll likely remember additional items. Don’t consider your first list the last one. Finally, collect whatever documentation you can (for example, receipts or credit card statements) to prove the value of lost possessions.
- If your home is so damaged that you can’t live in it, you’ll want to contact your utility companies and ask them to suspend your service.
Be cautious when authorities permit you to return to the disaster-affected area to assess any damage to your home. If it was partially damaged, check with local authorities to make sure it is safe to enter.
Stay on solid ground financially by halting all unnecessary spending. Immediately notify service providers, such as the cable company or lawn care service, so they can stop billing you. Estimate any income you expect to receive during the recovery process plus the emergency savings you have at your disposal, and then create a budget based off those figures.
The disaster may have affected your employment situation (for instance, you may require leave or your employer’s place of business may have been damaged or lost), and that could require a temporary adjustment to your standard of living. In your recovery-period budget, prioritize paying bills first. Necessities, followed by insurance premiums and rent or mortgage, should top your list. Work with creditors if you won’t be able to make payments on time to limit problems with any outstanding balances.
Compile or salvage these important documents and information, if you’re able: online passwords, financial account numbers, checkbooks and credit cards (in other words, ways to access your financial resources), investment and retirement account information, insurance policy numbers and contact information, and medical records.
If you need help learning how to replace vital documents and records, such as birth certificates and Social Security cards, the federal government has compiled a helpful guide.
As You Rebuild or Repair
Be careful if you choose to hire a public adjuster to help with your insurance claim. Be sure the adjuster is licensed to do business in your state and obtains the appropriate permits. Also watch out for the following red flags.
- Big upfront fees: Don’t pay a lot before you know if the adjuster is going to help you. Many states put a limit on fees.
- References to contractors who can help: Dishonest adjusters will sometimes work with contractors that give them kickbacks.
- False or inflated claims: This is fraud against the insurance company.
- Requests for a suspicious amount of personal information: Some con artists may pose as adjusters to steal your personal information.
As you repair or rebuild, get bids from several local, established contractors. Ask if the contractor has the required licenses, and get license numbers. Check with your state licensing agency’s website or hotline to make sure the licenses are valid. Ask the licensing agencies if the contractor has a history of complaints.
Special tax provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when your location is declared a major federal disaster area. Depending on the circumstances, the IRS may give you additional time to file your returns and pay your taxes. Both individuals and businesses in a federally declared disaster area can get a faster refund by claiming related losses on their tax return from the previous year, usually by filing an amended return.
In addition, people who live in major disaster areas may be eligible to delay tax filings and payments without penalty. The IRS automatically identifies the people in these areas. If you were affected but live outside the designated areas, you may need to call the IRS to request tax relief.
Again, keep all records of costs related to the disaster, as these can be claimed as a casualty loss on your tax return.
For more extensive information, see:
- The American Red Cross’ guides to recovering financially and dealing with the aftermath of a disaster.
- FEMA’s guidance on applying for assistance related to a federally declared disaster and tips on disaster recovery.
- The federal Disaster Assistance Improvement Program’s disaster recovery resources.
- The AICPA’s guide to financial issues and disaster recovery.
This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice.
© 2018, The BAM ALLIANCE