Financial Preparedness and Recovery From a Natural Disaster

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Brett Brenner Brett Brenner is president of the Electrical Safety Foundation International (ESFI). Appointed president in 2005, he has developed aggressive marketing and awareness campaigns to advance electrical safety. Such accesses have established ESFI as the primary source for unbiased electrical safety information to reduce the instances of fires, injuries and deaths. Brenner serves on the National Fire Protection Association’s Educational Messages Advisory Council and Underwriters Laboratories Consumer Advisory Council.

This guide was written by Lief Nielsen

Lief Nielsen

The emotional and mental stress caused by natural disasters can be overwhelming, and survivors may need help coping with the fear and confusion brought on by a weather-related emergency. The mental strain brought on by the financial concerns experienced in the aftermath can add to the stress a disaster survivor is already feeling.

After a natural disaster, there are resources to help you get back on your feet and recover financially. Learn what to do after a natural disaster to get your life back to normal as soon as possible.

  • If you’ve experienced a natural disaster, contact the National Red Cross online to find your local chapter or call 1 800 RED CROSS (1-800-733-2767).

In 2018, The U.S. had 11 natural disasters that each caused at least $1 billion in damage. The World Health Organization estimates that nearly 160 million people are affected by natural disasters worldwide. While the emotional toll of such disasters is immeasurable, the associated financial costs are astronomical.

Cost of Billion-Dollar Natural Disasters by Event, 1999–2019 (CPI-Adjusted)

Disaster Type Number of Events Average Event Cost ($B) Total Costs ($B)
Drought 17 $8.1 $137.1
Flooding 21 $3.6 $76.01
Freeze 3 $1.8 $5.5
Severe Storm 93 $2.3 $210.4
Tropical Cyclone 27 $30.1 $813.5
Wildfire 14 $5.3 $74.8
Winter Storm 8 $1.9 $15.3
All Disasters 183 $7.3 $1,332.6

Sources: NOAA

The severe-weather forecast is not expected to improve. There is no resolution in sight, and natural disasters are only getting more frequent, costly and devastating. In California, for example, the five most expensive wildfires have occurred since late 2017.


How Natural Disasters Can Impact Your Finances

Weather and climate catastrophic events can pose financial costs and challenges that probably haven't occurred to you. Make sure you have enough money in a short-term emergency fund, separate from your savings, for immediate expenses you may incur, and build your savings so you can survive until insurance payments are made.

Immediate Financial Concerns

Personal Safety

If you or anyone in your family are hurt during or immediately after a natural disaster, you should be able to seek out medical attention via the Red Cross or other responding agencies.

If you must be seen at a medical facility, you’ll need a form of payment for co-pays, medical supplies and any medication you may need.

Food and Shelter

In a sudden disaster, such as an earthquake, your home may be inhabitable, and you'll need to seek out temporary shelter after you assess the damage.

For emergencies with evacuations, the same holds true, but you'll be leaving your home before the disaster strikes, and you may require accommodation for a more extended period.

For large-scale disasters, FEMA or another disaster agency may set up a shelter station where you can go for free. Still, if you're the victim of a disaster that's small in scope, you may need to seek out temporary shelter at a motel, which could cost at least $100 for the night, depending on where you live.

Travel Expenses

If you’re able to leave by car, you’ll need money for gas. Without a car, it can be hard to leave a disaster area, and you’ll have to wait for evacuation. If you can get to another area where you can catch a plane or bus to a relative’s home, you’ll need money set aside to pay for this transportation cost.

Hygiene Products

If you have to evacuate your home in a hurry, you may need to purchase toiletries and other necessities. You may be able to get these essential items from a disaster relief organization, but it could take hours or days for one to be up and running in the disaster area.

Pet Care

Consider setting aside funds if your pet needs medical attention. You may also need to board pets or larger animals if you're expected to evacuate, such as in the event of a fire.

Preparation

Some natural disasters, such as floods and hurricanes, come with a little advance warning. Getting your family, home and possessions in the best shape to withstand a natural disaster can run into the thousands of dollars.

Battening down the hatches could include getting a generator, grabbing sandbags, boarding up windows and making sure you have enough supplies to ride out the disaster.

Financial Lasting Effects

Ongoing Medical Bills

Even with insurance, the cost of healthcare after a disaster can be enormous and add up quickly, especially if services such as ambulances, hospital stays or surgery are required. Follow-up appointments, medications and physical therapy can also add to the costs.

Insurance

Before disaster strikes, make sure you understand exactly what your homeowner’s insurance policy covers. You may believe that something is covered when it is not.

Even if you receive an insurance payout, you may still owe money. For example, if the insurance company declares your car a total loss and pays for it, you still may be on the hook for payments on your auto loan if you owe more than the insurance payout amount.

Loans and Debt

Contractors, utility providers and creditors who are unaware of your situation may have trouble reaching you and could impose penalties or refer you to collection agencies.

Payments, either physical or electronic, may not go through or successfully be put on hold, causing similar problems or overdrafts. Lenders who offer disaster relief help in the form of temporary payment suspensions called forbearances may expect the remaining balance to be paid back at a later point.

If your home is too damaged to live in, your mortgage company may still expect you to make payments until you arrange otherwise.

Job Suspension and Loss

If a disaster affects a small area, you may be able to return to work within a few days. If it affects your whole community, you could be out of work for weeks. In the worst case, your employer may never be able to do business in the community again, and you’ll be left without a job for an indefinite amount of time.

Repairing and Rebuilding

Your home may need work just to become livable again. Homeowner’s insurance may pay for some of it, but if you’re renting, you may need to find a new place to live.

If you’re waiting for an insurance payment to start repairing your home, just remember that you’ll still have a deductible that will come out of your pocket, which can sometimes be in the thousands.

It can take from a few days to several months or longer to make your home inhabitable once again. You’ll need to make living arrangements for this time.

How to Prepare Your Finances for a Weather Emergency in Advance

Fortunately, there are steps you can take to prepare for natural disasters, and many of them can be accomplished when you’re not directly in harm’s way. Here are the best ways to weather the storm and emerge in the strongest possible financial shape:

Establish an Emergency Fund

Natural disasters can knock out electronic infrastructure, so even if your credit is great, having a stash of readily-available cash can help with immediate needs. Having three to six months’ worth of expenses on hand in an emergency fund can help you stay afloat until you can get help and insurance payments in a disaster, and a safe portion of this should be set aside in cash.

Review and Update Your Insurance

If you're a homeowner with a mortgage, you have homeowner's insurance, and hopefully, even if your home is paid off, you're carrying some coverage as well. Many insured homeowners aren't aware that most natural hazards, known as "perils" in insurance-speak, are not covered under their policy. Flooding, for example, is the most common and costly form of weather damage, but many times, it is not included. Flood insurance is available, but it's a separate policy. Check to see if you're in a high-risk area and whether additional protection might make all the difference.

Take Inventory of Your Documents

Even in this digital age, some documents must be presented in hard-copy form. Getting a safe deposit box at your bank is the best way to avoid the risk of leaving crucial documents at home ahead of a natural disaster, including:

  • Social Security Cards
  • Birth Certificates
  • Bank Account Information
  • Credit Card Information
  • Wills
  • Real Estate Deeds
  • Mortgages/Leases
  • Insurance Policies
  • Marriage Certificates
  • Adoption Papers
  • Passports
  • Immunization Records
  • Contracts

Keeping digital scans of these files and their related phone numbers in an online archive such as Dropbox will go a long way toward replacing missing documents in the event they are lost.

A group of neighborhood helpers remove debris from a yard after a hurricane

Know What’s in Your Home

One of the most effective ways to streamline the insurance process is to document your possessions with a cellphone camera, methodically going from one end of your property to the other, inside and out. Narrate the video and note the serial numbers of major items. Remember, your phone, like anything else, can be destroyed in a disaster, so keep a copy of your documentation online.

Manage Your Bills

The fewer financial concerns you have during an emergency, the better. Set up automatic payments for mortgage, car loans, cellphone, credit card, insurance and other important recurring bills to avoid the financial consequences of missed payments. Don’t hesitate to discuss your situation with your creditors. A mortgage lender, for example, may be able to offer forbearance to prevent foreclosure, while your car loan banker may be able to suspend payments for a few months.

Financial Steps to Take After a Disaster

The unfortunate truth is that people lose everything they own after catastrophic fires, floods, hurricanes, tornados and other weather-related disasters every year. But for many of those people, disaster relief financial assistance can help them get back on their feet. Here are some of the ways to get money after a hurricane or other natural disaster.

Identify Disaster Relief Assistance

After experiencing a natural disaster and making sure everyone is safe and accounted for, fed and housed, you'll need to contact your insurer. They should be ready to assess your situation and render quick aid according to the details of your policy. Make it a point to understand what your insurance covers while you are choosing insurance and getting quotes.

If local authorities are unable to contend with a natural disaster, the governor may declare a state of emergency and ask the president to authorize the Federal Emergency Management Authority (FEMA) to step in. You may be eligible for house fire victim assistance, financial help after a hurricane or flood damage assistance. In addition, the federal government can help with tax bills, food costs, unemployment assistance and rebuilding loans. For emergency expenses that are not covered, services such as The United Way’s 211.org can put you in contact with local charitable organizations.

File Insurance Claims

Insurance companies are inundated with claims following a natural disaster, and there might be a time limit to file, so act quickly in contacting your carrier. Make sure to:

  • Call your insurance provider.
  • Let your provider know if you need immediate emergency assistance.
  • Document and photograph all damage, inside and out.
  • Make immediate repairs for health and safety reasons, but not extensive ones.
  • Meet with an insurance adjuster to go over damage in person.
  • Ask your insurance provider if they recommend a reliable contractor for repairs.
  • Keep careful note of all expenses, including mandatory travel and lodging.
  • Designate someone as a “point of contact” if your insurer might have trouble contacting you.
  • If you find more damage after you’ve received a check from the insurance company, reopen your claim.

Contact Your Creditors

After your immediate safety needs have been met, contact all creditors to let them know you were involved in a disaster. Creditors may already be aware of the disaster in your area. Creditors to contact include:

  • Mortgage servicer: If you have a home loan underwritten by Fannie Mae or Freddie Mac or if you have a FHA or VA loan and your home is in a natural disaster area, they must offer some form of relief. This could include deferring payments for just a few months up to a year. If your mortgage service is unwilling to help, or you don’t understand your options, contact HUD.
  • Car loan institution: The bank that holds your car note isn’t required to offer relief, however many do, and the Consumer Financial Protection Bureau has offered creditors guidelines to do so.
  • Credit card companies: The same holds true for credit card companies as it does for car loans. Check directly with them to apprise them of your situation and see what relief they will offer.
  • Student loan servicers: If you have a federal student loan, you may be able to get a forbearance, which will allow you to not make payments while you get back on your feet. Ask specifically for a “disaster forbearance.”
  • Utility companies: They likely know of the disaster in your area. If you’ve been affected, particularly if your home is uninhabitable, let them know right away. You shouldn’t have to make payments for electric, gas, water or sewer service if you can’t live in your home.

Avoid Repair Scams

While disasters can bring out the best in people, they can also summon the worst. Overcharging for vital goods and services can be rampant. Be wary of contractors who want to be paid upfront for construction. Low rates can mean shoddy work. Some companies offer hurricane relief credit cards, but look out for prohibitively expensive interest rates.

Expert Advice on Natural Disaster Precautions

Brian C Evans is a Disaster Recovery Expert Brian C. Evans, P.A., C.P.A.U. is the president of Eastern Public, LLC, an insurance claims and risk management services provider. Eastern Public, LLC works on behalf of consumers across the Eastern United States, before and after disasters occur, to assist them through the disaster recovery process. He has more than 20 years of experience in the industry and currently serves on the board of directors and as chairman of the professional education committee for the National Association of Public Insurance Adjusters.

What do you wish people knew or would do before disaster strikes? What can they do, from a financial standpoint, to prepare ahead of time?

The advice is different for businesses than it is for people. Businesses would benefit by hiring outside companies to audit their business processes from a risk management standpoint before disasters strike. Such a risk analysis can identify unforeseen hazards to a business and provide actionable solutions to help mitigate unexpected business interruption when it occurs. No business is too big or too small for such an audit.

For the average citizen, it’s all about education. The news and information that we choose to digest, or not, is having a tremendous impact on how we are responding to and dealing with the world's problems. It’s creating a polarization that has largely devastated our ability as a nation to solve problems. When disasters strike, these polarizations can result in indecisiveness and inaction that can cost lives.

What's a mistake you see over and over again when people are trying to recover from disaster financially?

Most consumers plan for protecting themselves from financial loss resulting from man-made or natural disasters largely begins and ends with purchasing property and casualty insurance. The biggest mistake we see from consumers is their reliance only on these insurance carriers and trust in them to secure timely, equitable settlements when disasters strike.

Consult with your own qualified public adjuster (Not the insurance carriers adjuster) or an attorney as early as possible in the recovery process. They can provide essential resources, information and actionable knowledge to help expedite and protect consumers.

What scams should people look out for when they are trying to recover? How can people avoid this?

There will always be those looking to take advantage of a desperate situation. People need to be mindful of that following any disaster. Ignore solicitations. You will need help, and should seek it following a disaster. But do your homework and be mindful of good business practices.

A reputable company doesn’t need to knock on your door when your house is on fire to get you to sign a contract, a general contractor is not an insurance expert, and there are generally no decisions following a disaster that require you to make rushed choices.

People can avoid these types of mistakes after a disaster occurs by following few simple tips:
Ignore solicitations, all of them.

  • Reach out to trusted sources for guidance.
  • State and local agencies such as the fire or police departments and the local Red Cross can be very helpful to understanding what you can and should be doing immediately following your loss.
  • Track all expenses and time invested as relates to the disaster in a centralized place. Spent time cleaning up the yard after the disaster? Document it. Got a call from your insurance adjuster? Write it down and include context. Local paper report on your disaster? Keep copies of their reporting. Documenting the early stages and developments of a claim can be instrumental to overcoming financial disputes later.

Disaster Relief Resources

Natural disasters can be costly interruptions to your life, but they don't need to spell financial ruin. Armed with the knowledge of proper emergency preparation and how to tackle recovery, you can minimize the amount of money you'll need to spend. Governmental agencies and nonprofit organizations can lend you a hand and help you recover.


Disabled American Veterans
This nonprofit organization offers disaster relief specifically for injured or wounded veterans and their families.

Electrical Safety Foundation International Disaster Safety
Electrical safety after a disaster is crucial. Learn what to do to ensure your safety before, during and after a disaster.

Federal Emergency Management Agency (FEMA) Resources
FEMA is an agency of the Department of Homeland Security. It provides short-and long-term disaster relief, including housing.

IRS: Disaster Assistance and Emergency Relief for Individuals and Businesses
The IRS offers information tax relief for homes and businesses affected by a natural disaster.

Office of Community Services: Low Income Home Energy Assistance Program (LIHEAP)
This agency offers help paying utility bills for those who qualify.

Red Cross Disaster Relief & Recovery Services
The Red Cross is usually first on the scene when a disaster hits, providing immediate help with food, supplies and shelter. They provide a sound disaster relief infrastructure in the U.S.

USA.gov Financial Assistance After a Disaster
This official U.S. government site offers tips, advice and contact info for specific disaster recovery needs.

U.S. Department of Labor: Disaster Unemployment Assistance (DUA)
In a federally declared emergency, the U.S. government may provide unemployment benefits, particularly if the employer can no longer offer work or those affected can’t reach their places of employment.

Moving Past Disaster and Into Action

Catastrophic events are frightening, but you are not powerless. Once you’ve had a chance to recover from the initial shock, you can take charge of your situation. Rather than wait for a natural disaster to hit, you can start preparing immediately.

  • Talk to your insurer and determine whether you have sufficient coverage now, before disaster strikes.
  • Take stock of your belongings.
  • Get your paperwork in order and stashed in a safe place.
  • Start an emergency fund.
  • Set aside emergency cash.

Now is the time to set up your financial game plan for when an emergency strikes.


Sources

Climate.gov. “2017 U.S. billion-dollar weather and climate disasters: a historic year in context.” Accessed March 6, 2020.

National Oceanic and Atmospheric Administration. “Billion-Dollar Weather and Climate Disasters: Overview.” Accessed March 6, 2020.

National Oceanic and Atmospheric Administration. “Billion-Dollar Weather and Climate Disasters: Summary Stats.” Accessed March 6, 2020.

USA.gov. “Financial Assistance After a Disaster.” Accessed March 6, 2020.

World Health Organization. “Environmental health in emergencies.” Accessed March 3, 2020.