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4th Quarter 2017

Protecting Your Finances From Disasters

The string of hurricanes that affected areas such as Texas, Florida, and Puerto Rico in 2017 illustrate how important it is to make sure you have enough insurance on your home and to maintain an emergency fund. Even if insurance covers most of the damage, you could still get hit with big deductibles. Or you may not have the right coverage. Many people whose homes were damaged by Hurricane Harvey discovered that flooding is not covered by homeowners insurance. It’s important to prepare for unexpected expenses, so you don’t land in expensive debt after an emergency

Review your insurance. Make sure you have enough coverage to protect you if your home is destroyed, and search for any gaps. Consider flood coverage, even if not required by your mortgage company. You can get coverage from the National Flood Insurance Program (www.floodsmart.gov) or you may be able to buy a private flood policy. Ask your homeowners insurance agent.

Understand your deductible and out-of-pocket costs. You may have a deductible of $500 or $1,000 before homeowners insurance coverage kicks in, but if you live in a higher-risk area (such as Florida), you may have a much higher deductible for windstorms — such as 1 percent or 2 percent of your insurance amount. If you have a $200,000 policy, for example, you may have to pay $2,000 to $4,000 out of your pocket before you get any help from the insurance company. And some kinds of damage have limited coverage under home insurance, such as the cost of removing fallen trees. Try to keep at least enough money in your emergency fund to cover potential out-of-pocket costs

Look for other sources of emergency money. Even if your insurance covers the losses, you may need extra money to pay for repairs while you wait for a claim to be settled. Seek out special disaster assistance programs. The Federal Emergency Management Agency may provide some disaster assistance if you aren’t covered by insurance or may pay for expenses that aren’t covered by your policy. See www.disasterassistance.gov for more information and to apply. Also, the U.S. Small Business Administration offers disaster assistance loans for individuals — not just for businesses — which can provide low-interest loans for repairs. See https://disasterloan.sba.gov/ela. Plus, check out special tax breaks for disaster victims. See www.irs.gov/disasters for details

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