When Disaster Strikes: Navigating Financial Recovery

In last week’s blog, we discussed the importance of having a plan for recovering from natural disaster. Whether you live on the Texas Gulf Coast, in Oklahoma’s “Tornado Alley,” in the San Francisco Bay area, in Florida, in the middle of timber country in Idaho, or anywhere in between, disaster can strike with very little notice. After your personal safety and that of your friends and loved ones, nothing is more important than dealing as successfully as possible with the financial damage that natural disaster inflicts upon your property and financial resources, whether it be from storm, fire, earthquake, or flood.

Last time, we listed the crucial documents that you’ll need in order to begin the recovery process. Securing and having on hand items like your Social Security number, birth certificates, and other primary personal documentation will give you a big leg up on working with insurance companies, federal agencies, law enforcement, and other corporate and governmental entities that are able to offer assistance as you begin the recovery process. Now, let’s consider some of the practical steps you can take in the aftermath of a natural disaster.

First, let’s discuss which agencies and other entities you should contact as soon as possible. The American Red Cross is always one of the first organizations to respond to any natural disaster, and especially if your home is too damaged to inhabit. Contacting them, either at their website or by calling the number of your local chapter, can help you obtain emergency housing and other necessary immediate assistance. If your community has been declared a federal disaster area, the Federal Emergency Management Agency (FEMA) can also help with emergency housing and even emergency cash assistance. Such financial assistance may also be obtained through state or local government agencies; it is usually nontaxable.

If possible, you should next secure your property. If authorities allow it, go home and gather any valuables and important documents that are retrievable. If you can, carry out temporary repairs and other measures to prevent further loss or damage. The Red Cross and FEMA may also be able to help you obtain materials to make these repairs. You will need to keep good records; your insurance company will likely reimburse you for any expenses you incur, as long as you can provide proper documentation.

Speaking of insurance companies, you should now notify your claims representative. At this time, you may wish to inquire whether your policy contains provisions for reimbursement of emergency housing costs, food, laundry, and other living expenses. Sometimes, the insurer will issue a check up front; other companies may require you to provide receipts for reimbursement. In either case, it is important for you to keep receipts for your expenses. Some of these reimbursements may be taxable, but proceeds used for repair or replacement are usually not.

Now it’s time to notify your creditors of your situation. If you are unable to live in your house, contact your utility companies and request that they halt billing until their services are available again. Ask other creditors for additional time to pay. In such circumstances, most creditors will work with you, especially if you call them before the payment due date. Prioritize communications with your mortgage holder, your vehicle lien holder (if applicable), and your insurer.

These initial steps will help you begin the process of getting back on your feet. In a future article, we’ll take a look at the longer-term implications of disaster recovery and how you can minimize the amount of time it takes to get back to a more normal routine.

NOTE: Many of the ideas in this article come from “Disaster Recovery: A Guide to Financial Issues,” published with the cooperation of the National Endowment for Financial Education, the American Institute of Certified Public Accountants Foundation, and the American Red Cross.

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