Hurricane Harvey caused unprecedented damage to much of the Texas Coast and the Houston area after days of relentless rain, wind, and storm surges. The damages are estimated to cost over $160 billion, more than Hurricanes Sandy and Katrina, and will likely take years rebuild.
Even if you don’t live in a typical hurricane path, every area is prone to potential natural disasters—such as tornados, earthquakes, wildfires, flash floods, and winter storms—that could turn your life and finances upside down. So, it’s important to prepare now and know what steps to take in the aftermath of a disaster.
In this post, you'll learn how to be properly insured, get a fair claim settlement, apply for federal assistance, work with contractors, and avoid insurance scams. I’ll cover tips to prepare for and deal with any type of natural disaster so you ’re in the best position to save yourself and your finances.
How to Prepare for a Natural Disaster
Being prepared is the best way to protect your family, property, and finances from any type of emergency or natural disaster. While certain emergencies come with a little notice, like a hurricane, others may be completely unexpected, such as an earthquake or tornado.
During a natural disaster, you could be separated from your family, be away from home, or be without water or electricity. By taking a few steps now, you won’t be caught completely off-guard in an emergency and can manage your household’s unique situation the best way possible.
No matter what type of natural disaster you might face where you live, follow these 5 tips to be prepared and stay safe:
1. Have adequate insurance.
Just about every homeowner has home insurance, because mortgage lenders require it. A basic homeowners policy pays for claims when a natural disaster, such as a fire, tornado, hail, or windstorm, damages your property. Your possessions, such as furnishings, clothes, electronics, and jewelry, are generally covered up to certain limits for damage or theft.
There’s also a liability portion to protect you if someone gets hurt while they’re on your property or you accidently hurt someone anywhere in the world. Home insurance also pays “additional living expenses,” such as a hotel and meals if you can’t stay in your home due to a covered disaster.
If you’re a renter, you also need insurance, because your landlord isn’t required to cover you. Renters insurance gives the same protections as homeowners: coverage for your personal belongings, liability, and additional living expenses. But it doesn’t cover the actual structure of your dwelling, because that’s owned by your landlord.
Problem is, six out of ten renters don’t have renters insurance. A typical renters policy probably costs much less than you might think, just $188 per year on average across the U.S.
No matter if you own or rent, it’s important to know that expensive items typically have coverage caps. For instance, you might only get $2,000 for special categories like jewelry, computers, silverware, and collectibles. If you have items worth more than the coverage caps, it doesn’t cost much to add a rider that increases limits so your most valuable possessions could be replaced.
Also note that certain types of disasters, such as hurricanes, earthquakes, and hailstorms, may come with special percentage deductibles, depending where you live. These are additional and separate deductibles from all other types of claims, such as fire or theft.
For instance, you might have a separate 3% hurricane deductible that applies whenever you have damage from an officially-named hurricane. If your home were insured for $200,000, you’d be responsible for the first $6,000 ($200,000 x 3%) in repair costs. That’s much more expensive than paying a standard $500 or $1,000 deductible.
In some states, a hurricane deductible applies when a Category 1 storm causes damage whether it made landfall or not. Other states allow Category 2 to be the threshold.
And in other states, a hurricane deductible applies from the moment a hurricane watch or warning is issued until 72 hours after it ends, and can only be applied once each hurricane season, from June to November. As you can see, there’s a lot to know about insurance and the fine print will vary depending on where you live.
2. Know if you need flood insurance.
Another issue that really trips people up about home insurance is that floods aren’t covered. Unfortunately, most victims of Hurricane Harvey don’t have flood insurance. This is a huge problem because neither homeowners, renters, nor business insurance covers any type of damage from ground water.
Flooding is the nation’s most common and expensive disaster. Floods don’t even have to be catastrophic to cause major damage and they can happen anywhere. Just a few inches of water can be enough to cause over $10,000 of damage in an average home.
According to FEMA (Federal Emergency Management Agency), more than 20% of flood claims come from properties outside of high-risk flood zones. And 98% of counties in the U.S. have had a flooding event.
Flood insurance is a separate policy that anyone can buy to protect their property—if your community participates in the National Flood Insurance Program. Even though flood insurance is backed by the federal government, it’s brokered by regular insurance companies or agents.
Have a conversation with your insurer about what types of insurance you need and do you homework by getting a flood insurance quote. Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you because it will be too late.
Also note that you can’t get flood insurance for vehicles. If you have comprehensive coverage on your car, motorcycle, or RV, any flood damage will be covered.
Mortgage lenders require you to have flood insurance if you buy a home in a designated flood zone. It covers you from flooding whether or not damage occurs as part of a larger event that’s declared a disaster by the federal government.
Remember that water damage from rain, high winds, or a tree that fell on your roof are covered by a standard home or renters insurance policy. But damage to your home or personal belongings that occurs due to rising ground water is never covered, except when you have flood insurance.
If you’re not covered and your area qualifies for disaster assistance, it may come in different forms. Most assistance is not a gift, but a low-interest loan from the federal government that must be paid back.
In some cases, FEMA offers disaster grants to communities and residents that don’t need to be repaid. However, the amount you receive could be insignificant compared to what it costs to recover. Assistance amounts always depend on the severity of a disaster and survivor needs.
Help from FEMA doesn’t take the place of home, renters, business, or flood insurance—nor is it meant to restore your property or belongings to their original condition before the disaster. And to qualify, you may be required to buy and keep flood insurance for a certain amount of time.
FEMA can’t duplicate any benefits you get from an insurer, but gives assistance to help those who are displaced find a temporary place to live and get back on your feet. You can apply for disaster aid at disasterassistance.gov. You can also contact the Red Cross if you’re not insured and need financial help.
You can use FEMA tools to see your state’s flood history and compare the amounts of flood insurance payouts to amounts paid for federal disaster aid. For instance, from 1996 to 2016, in Texas, average flood insurance claim payments were just over $40,000, while free assistance to eligible households and individuals who were uninsured, was just over $7,000 on average.
It’s easy to see that having flood insurance provides much more help when you need it. Check out the FEMA Map Service Center to see if your property is in a flood zone using their interactive online maps. Get free quotes for homeowners, renters, and flood insurance at sites like insuranceQuotes.com or netQuote.com.
3. Create a home inventory.
One task that’s often very difficult for disaster victims is listing all their damaged possessions on a claim form. Imagine if you returned home and found everything you own destroyed by a fire or tornado. Would you be able to list each personal belonging you lost and its value?
That sounds like a daunting task for anyone, especially someone who just became the victim of a natural disaster. Make it easy on yourself by creating a room-by-room inventory now. Not only will that help you get a potential claim settled faster, but you’ll know how much insurance you need to purchase in the first place.
Start by listing the most expensive items in each room, such as appliances, electronics, computers, and jewelry. Gather up any original sales receipts or appraisals to help you estimate value. If you don’t have a receipt, make a note of where you bought an item and any serial or model number.
For clothes and housewares, simply count the items you own by category, such as 3 coats, 15 shoes, and 10 place settings of china. If you own a lot of stuff and have never created an inventory, don’t let the task overwhelm you. Just get started with one room and make a goal to complete an additional room each week until you’re done.
Use a smart phone or video camera to capture each room of your home, by walking around and opening every closet, cabinet, jewelry box, and drawer to get well-lit video of every item you own. Keep your inventory, receipts, and appraisals in at least two different places, such as a bank safe deposit box, a flash drive, and in the cloud.
Google Docs and free storage sites like Dropbox are great places to keep copies of all your important documents, such as birth certificates, marriage certificates, Social Security cards, titles, deeds, proof of vaccinations for pets, passports, and any irreplaceable family photos.
4. Create an emergency kit.
Another key task to staying safe in any disaster is to have an emergency kit or “go bag.” There are many lists of items for an emergency kit you can find online. What you need depends on the type of emergency you might have where you live.
I won’t attempt to create a complete list for every type of disaster. But here are some critical supplies that likely apply to everyone, no matter the potential disaster:
- Radio
- Flashlight
- Extra batteries
- First aid kit
- Water
- Nonperishable food
- Pet food
- Medications
- Change of clothes
- Cash
- Copies of critical documents
Buy a big backpack and put as many of these items in it as possible. Keep the backpack where you could quickly grab it, such as under your bed or in a coat closet near your front door. And if you live in a multi-story home, keep a fire ladder upstairs so you could make a safe window escape.
5. Make an emergency plan.
Make sure that your family knows where your go bag, fire ladder, and fire extinguishers are stored and how to use all your emergency supplies. It’s great to have all this gear, but it won’t help you if no one is really prepared to use it.
Together, create a plan to follow in the event of any disaster. Ideally you should have a family member or friend who lives outside of your area to be the designated emergency contact. Share all ways to connect, including phone, email, Facebook, and Twitter.
Decide what your escape plan would be, such as a meeting place you could walk or drive to, depending on the type of disaster. For instance, if you have a house fire, you could meet up at a neighbor’s home.
Or if there’s a widespread disaster, consider a destination farther away. Find out where the public shelters in your area are and what rules are enforced, such as accepting pets. Also know what to do when evacuating your home before a storm, such as turning off your water, gas, and power.
How to File Insurance Claims After a Natural Disaster
If you know a major disaster is headed your way, such as a hurricane that’s projected to make landfall where you live, can register for help with FEMA ahead of time at Disasterassistance.gov.
Once disaster strikes, don’t waste any time reporting it to your insurance company or agent. Even if you can’t get back to your home, business, or vehicle to see the damage, you can still file a claim. You want to be at the top of the list for your insurer to set an adjuster’s inspection, claim processing, and payment.
If you need financial help for out-of-pocket temporary repairs or living expenses while your place in uninhabitable, ask about getting an advance insurance payment. As I mentioned, most home and renters insurance policies pay some amount of living expenses, such as hotel and meals, if you can’t live in your home due to covered damages. Find out the types and amounts of costs that are covered and be sure to keep your receipts.
Once you do see your damaged property, take pictures and video, if possible. If your street number isn’t visible, be sure to post a sign with your address and the name of your insurance company where it can be seen.
It’s best not to throw away any damaged items until an adjuster has seen them. However, insurers want you to make temporary repairs to prevent further damage, such as covering broken windows to keep rain out, if possible. Again, save all your receipts.
You can begin reaching out to contractors so they can be at your property when an adjuster inspects the damage and creates your loss statement. But don’t make permanent repairs or sign any agreements with contractors until you get the green light from your insurance company.
Once your insurer agrees to pay your claim, they must send your payment within 5 business days. However, after a major disaster, insurers may be authorized to extend this deadline by a couple of weeks, which is the case for Hurricane Harvey.
Depending on your insurer and the amount of your claim, it may be settled with two checks. The first is issued after the adjuster estimates your repairs, less depreciation, and less your deductible. The second payment is issued for the balance of your claim after the contractor’s final bill is received.
What If You Disagree with an Insurance Settlement?
If you disagree with the adjuster’s loss estimate, be sure to discuss it with your insurer. It’s possible that he or she missed something. If not, you can hire a third party for help, such as an appraiser or a public adjuster.
A public adjuster charges fees, such as 10% of your settlement, to help negotiate claims and handle the repair process on your behalf. He or she works for you, not the insurance company.
And if you’re still not satisfied with the outcome of your insurance settlement, you have the right to sue an insurer in court or use an alternative dispute method, such as mediation. If you believe you’ve been treated unfairly, you can file a complaint with your state’s department of insurance.
How to Avoid Insurance Scams
What you often see after a disaster is an influx of criminals and greedy storm chasers who take advantage of disaster victims when they’re most vulnerable because they know there’s high demand for construction work.
Don’t fall for various types of fraud, such as price gouging, shoddy construction repairs, and people who might disappear with your money. If you ever feel pressured or threatened by a contractor, report them to the police.
To avoid insurance scams, make sure contractors have insurance, such as general liability, and proper registration for their trade. For instance, in Texas, specialty contractors, such as electricians and plumbers, must be licensed to legally work in the state. Call or go online to your state’s department of licensing to see if a company is legitimate or has any complaints on file.
Always get written estimates from several contractors and check their references. Make sure the estimate includes site clean-up, trash removal, a starting date, and an estimated completion date. It’s not unusual for a contractor to ask for a partial payment to begin work, but pay as little upfront as possible, such as 10% or 15% of the job estimate.
Some contractors may ask you to sign an assignment of benefits (AOB), which allows them to get paid directly from your insurance company. Although it’s common in trades like water extraction, roofing, and plumbing, it can be easily abused with overbilling.
So, I don’t recommend signing your insurance settlement over to a contractor. Instead, stay in control of the funds and make a final payment only when the work is completed to your satisfaction.
Finally, ask the contractor to provide lien releases or partial lien releases from any subcontractors as a condition to receive payment. That insures they can’t put a lien on your property if any problems arise.
This article was originally published on Quickanddirtytips.com.
Laura Adams is a personal finance expert, award-winning author, host of the top-rated Money Girl Podcast, and insuranceQuotes’ senior analyst. Join a growing group of thousands who are taking their finances to the next level in her free Dominate Your Dollars private Facebook group.