How Natural Disasters Can Affect Your Finances

by Emily Guy Birken · 4 comments

We have all been horrified to watch the devastation in Japan and Alabama over the past weeks and months, and it’s natural to start wondering what it would be like if a natural disaster happened in our neighborhood. While the toll that natural disasters take on lives, families and communities is certainly more important, it is a good idea to understand the financial consequences of major events like earthquakes, tornadoes, hurricanes and floods. What can you expect financially if you are ever in a natural disaster?

After a disaster strikes, it’s important to know that you are eligible for help. The Federal Emergency Management Agency (FEMA) offers both funds and counseling for those affected by disasters, as does the Red Cross. You can expect to receive help with any number of basic necessities, from finding medical care, food, and temporary housing, to helping you to remove debris and repair your home and possessions.

Similarly, free legal aid is available to lower-income victims of disaster through the American Bar Association’s Young Lawyer’s Division—a boon for those who are trying to figure out how to cut through red tape and make sure that families and property are taken care of. Finally, the U.S. Labor Department offers unemployment insurance to disaster victims who are unable to work, making it much easier to ride through the difficult time of picking up the pieces.

Although it can be very easy to lose focus on anything beyond trying to get home, car and other property back in order, it’s important that disaster victims remember to remain on top of their bills. Unfortunately, the mortgage, credit card bills and utilities are all still due, despite your setbacks. If you let any of your bills get out of your control, you will often have to face late fees and increased interest rates. If you don’t know how to juggle both your clean up effort and your regular bills, contact your creditor while you also avail yourself of the counseling offered by FEMA or the Red Cross. Don’t let the natural disaster dictate your finances and credit score.

Another important task immediately after a disaster is to make sure you secure all of your important papers and file all of your insurance claims as soon as possible. Make sure you have a copy of your important paperwork in a safe place (both before and after the disaster) so that you will easily be able to access everything you need. And the sooner you file your insurance, the sooner you will be able to start working to recover from the disaster.

Finally, the IRS will allow you to deduct some of your casualty losses in the year that the loss occurred, so you will want to put in a call to the IRS or your friendly neighborhood tax attorney to find out how to take advantage of this stipulation.

The best defense against a natural disaster is a good offense. Do what you can ahead of time to prepare for the worst. Making sure that your insurance covers the common natural disasters in your area is a necessary first step, as is keeping a good inventory of your property and having an emergency fund savings account. Hopefully, you’ll never need to use any of them.

In the first days and weeks after a disaster, your future finances are of course not what you are worried about. But it makes sense to do everything in your power to make sure that the natural disaster is only a blip in your life, rather than something that defines you and your financial future.

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  • Patrick R. Carlson says:

    I think it’s a great idea to have a disaster preparedness plan for your family and for you business if you have one. Although we can’t control the weather or nature, we can provide ourselves the best possible support system for the time after nature strikes.

    The financial effects of natural disasters on families and businesses can be extreme. I agree with the comments above: a safe deposit box or a binder that can be quickly found or carried away are great ideas for preparedness. Having important documents and contact information at your fingertips will be invaluable not only when a natural disaster strikes but if something were to happen to you or for when you pass away. A business that has a plan for what happens after a disaster is much more likely to survive than one that doesn’t.

  • Investor Bees says:

    It is very difficult to protect finances in case of natural disasters as everyone would be thinking saving their lives first.
    your property is gone, any cash you have is also gone, documents would be gone.
    only thing you can expect is help from government and your insurance company to give you proper compensation

  • Derek says:

    I keep a working copy of important phone numbers (family, friends, advisors), legal documents, insurance policies, and financial information in a single binder that I can grab at any time for just such an emergency. It will also come in handy if something happens to me… so my wife will have all the important details she needs.

  • Justin says:

    Keeping a safety deposit box with copies of all your insurance, and things like birth certificates is important, the cost is minimal and like insurance, you’re glad to have it if the need for backup documentation ever arrives.

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