Nearly every part of the country is exposed to the risk of some type of natural or man-made disaster. It may be flood, earthquake, tornado, hurricane, forest fires, a broken dam, nuclear reactor, or chemical spill. Hopefully you are covered by a homeowner’s insurance policy. Next time you meet with your agent, ask for an explanation of what type of disasters are NOT COVERED. You may also wish to purchase extra coverage. If you are concerned about the additional premium cost, consider increasing your deductible. You can more easily afford the larger payment for a small claim than the larger loss for having inadequate coverage.
PREPARATION TIPS
- Take insurance papers with you if you must evacuate your home or give copies to family members. It is an excellent idea to have a photocopy stored in a safe deposit box.
- Keep extra cash in the house. A major disaster frequently closes your normal access to cash.
- Keep checks and valuable papers in one place for easy access and removal.
- Keep a 3-6 month emergency fund available in some type of account that you can draw on quickly if needed. Arrange for wire transfer privileges ahead of time as a precaution.
- Take a video inventory of your home. If possible, dictate comments on the furnishing and improvements. If you maintain records of purchases, it is a good idea to have the entire file photocopied and stored in a safe deposit box.
- Make sure you always pay insurance premiums on time.
- Make sure property/casualty insurance is the best you can get. There are some special provisions you should be certain are included:
- Guaranteed Replacement Coverage
- Inflation Rider to keep coverage limits current
- Content Riders:
- Antiques and rare books
- Computers and video equipment
- Collections
- Jewelry, furs, etc.
- Fine Arts
- Guns
- Current Zoning Rider, also known as a Code Upgrade or an Ordinance or Law Rider
- Tenant or Contents Insurance for condominiums
POST DISASTER TIPS
After a disaster, reimbursements by an insurance company will be based on supporting documentation. The following are examples of expenses that may be reimbursable and suggestions for documenting damage.
Living Expense Reimbursement
- Baby sitter costs while looking for new residence.
- Cellular phone while yours is out of order.
- Eating out, if your temporary apartment has no kitchen.
- Mileage in excess of regular driving to work, etc.
- Laundry (since you will have no washer and dryer).
- Family rent – hotel or apartment.
- Heat and cooling arrangements.
- Generators if rented for your property.
Personal Property Reimbursement
- Take a hand held recorder and walk through house. Talk about what you see, age of the item and condition. Don’t say it’s average if it’s not. The insurance company will pay you based on the average value, not the actual value of the item that you purchased.
- You can’t get paid for what you don’t write down.
- Never say it’s a final inventory – always say it’s a partial. You’ll keep remembering things for many months and you don’t want to preclude your payment for them. On each page of inventory you submit to the insurance company write: “Partial List, Subject to revision as memory is refreshed.”
- Don’t forget food spoilage losses. These can be substantial.
Tax Considerations
- If you’ve never used an accountant before and you have losses, now is the time. Casualty loss rules are complex. It’s worth the expense if you have the losses.
- Consult an accountant before buying or selling your damaged property.
- It is possible to amend the prior year’s tax return to report casualty losses. This would allow an immediate refund rather than waiting until the next filing
- Special consideration is frequently granted for federal personal income tax filing.
- No extension of time is granted for self-employed or corporate employer deposits of withheld income taxes, Social Security taxes or excise taxes for employees.
General Guidelines
- Find out who in your community has the same insurance carrier and compare notes. What were they paid for and what were they told by the adjuster?
- Realize that all the problems aren’t always apparent right away. For example, cracks in the foundation or plaster may become evident after settlement, local blasting or street repairs.
- Realize you will not be prepared to make an accurate assessment of the damage right away.
- Realize you may be emotionally unable to complete the process for many months.
- Keep Records and Receipts of Everything.
- Write letters to your insurance company, after conversations with adjusters, confirming what they told you.
- Stop any further damage by making essential repairs as soon as possible.
- Do not cash checks with a “final acceptance endorsement” on the back. Have the insurance company reissue them.
IMPORTANT DISCLOSURES This letter may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.” Performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor. Investment in securities, including mutual funds, involves the risk of loss. Nothing in this letter is intended to be or should be construed as individualized investment advice. All content is of a general nature. Individual investors should consult their investment adviser, accountant, and/or attorney for specifically tailored advice.
