In recent years, increasingly destructive hurricanes have hit the United States with a greater frequency. Whether you are still cleaning up from this hurricane season or preparing for the next, use this guide to help keep your family safe and your finances secure.
Hurricanes cause an estimated $28 billion1 of damage in the U.S. every year. If you live or own property in the path of these devastating storms, this guide can help protect your personal and financial well-being.
Before the storm
In a natural disaster, your first concern should always be safety. Make sure your family has an emergency plan in place before a weather event. Know your evacuation route and where to seek shelter. Ask local officials about your community’s disaster/emergency plan, as well as your children’s school emergency plan.
Review your home insurance coverage to understand policy limits, exclusions, standard deductible(s) and any special coverage that may apply for hurricane/wind damage. Consider additional coverage as needed, such as flood insurance.
It’s a good idea to keep photos and/or video of your home contents, especially items of high value. Having documentation ahead of time will make it easier to claim any available insurance and tax benefits.
Safely store important documents
If your property sustains damage in a storm, you will need access to important documents to maintain your finances, satisfy insurance claims and manage any tax implications. Consider storing these in a water-tight lock box, keeping copies offsite in a secure location like a bank safety deposit box and/or storing them digitally. These documents include:
- Personal identification such as a driver’s license and/or passport
- Auto, home and any other insurance policies
- Bank account information
- Receipts and tax documents which show how much you paid for your property
- Information about your health insurance or other employer benefits
Preparing an emergency supply kit
Consider preparing a basic emergency supply kit to keep in your home or vehicle including:
- A three-day supply of water and non-perishable food
- Battery-powered or hand crank radio and flashlight with extra batteries
- First aid kit and any necessary medications
- Basic tool box including a cell phone charger and matches or a lighter
- Cash or traveler's checks
You can see a full list of the items recommended by the Federal Emergency Management Agency (FEMA) here.
After the storm
Your next priority once a storm has passed—after ensuring your family’s safety—should be protecting your property. Call your insurance agent(s) to report damage and file any claims. Your insurance company must acknowledge your claim within 15 days of receiving it.
You’ll want to make any emergency repairs to prevent further damage. Don’t forget to make a list of damaged property and take photos/video as evidence. If possible, grab samples/swatches of damaged household items (granite countertops, hardwood floors, etc.) to help establish value. Keep a record of repair-related expenses and all receipts, including those related to temporary lodging, meals, rent, transportation, etc. for any available insurance and tax benefits.
Settling your insurance claim can be a complex process. It is important to understand your coverage and discuss with your agent how it is being applied. Here are some tips to keep in mind:
- If possible, be present when your insurer inspects the property; you may wish to have a contractor available, if possible
- Keep a record of all conversations with your insurance agent and disaster relief personnel, as well as the times and dates of all calls or visits
- Compare notes with other disaster victims about the assistance they are receiving
- Make sure your insurance company, claims adjuster(s), and creditors know how to contact you if you’ve been displaced
Income and resource considerations
Getting a handle on your financial situation can make this stressful time more manageable. Outstanding bills and creditors can pileup quickly, but keep in mind creditors may offer relief after natural disasters, such as working out a manageable repayment plan or possible payment forbearance. Check with your insurance company about an emergency cash advance or pre-paid debit card for urgent repairs and temporary living expenses.
For emergency resources coordination, contact FEMA for assistance obtaining:
- Emergency cash assistance
- Grants for home repairs and replacement of essential household items not covered by insurance
- Grants to replace personal property and help meet medical, funeral, moving, storage, and other serious disaster-related needs not covered by insurance
- Assistance with rental payments/temporary housing
- Unemployment payments in certain situations
Additional emergency relief programs may be available from your state/town, and The Small Business Administration (SBA) may be able to provide disaster loans.
If you need additional immediate financial resources, your brokerage accounts, company savings plan, IRA, life insurance policy or other assistance from your employer may be available. Your company human resources department and your financial advisor can help identify the solutions that best fit your situation.
Tax implications of a hurricane
Hurricane damages in a federally declared disaster area fall under the casualty loss deduction for federal income tax purposes. Damage caused by the storm that is not reimbursed by your insurance or other sources is usually deductible, but you must file an insurance claim first.
IRS Publication 547 (Casualties, Disasters, and Thefts) is an excellent resource to reference for more information regarding the tax deductibility of a casualty loss, as well as IRS Form 4684 (Casualties and Thefts) and its instructions. Determining the amount of your casualty loss can be complex. The IRS website can also help you identify other possible disaster relief programs.
If you have any other questions about the financial implications of a natural disaster, you can contact an Ayco advisor for help.
