How to Prepare and Recover When Mother Nature Wreaks HavocThe threat of Oklahoma spring weather serves as a reminder to ask yourself, are you prepared should a sudden disaster strike?
Natural disasters can lead to financial disasters, according to the personal financial planning experts at the Oklahoma Society of Certified Public Accountants. Fortunately, there are steps you can take to protect yourself and minimize losses. Having a plan and making sure you’re prepared can help reduce the stress of trying to recoup your losses and even help speed up the recovery process.
Prepare for disaster.
The images on the news may seem remote and removed from your daily life, but a natural disaster can strike anyone at any time. The good news is that there are practical steps you can take now to be ready for the “just in case” scenario.
- Safety first. In case of a disaster, have a plan. Make sure your family knows where to go and what to do. Don’t count on being able to access phones or email. The Federal Emergency Management Agency (FEMA) (http://www.fema.gov/) offers suggestions about preparing your family and business for emergencies.
- Review your insurance. Know what kinds of disasters your insurance will cover. Many people are surprised to discover they are not covered for specific types of disasters like a flood. Review your policy every year to make sure your coverage is adequate. For example, if you’ve built an addition on your home and significantly increased its value, you will need to increase your insurance coverage as well.
- Know your stuff. Create an inventory of your home, its furnishing and your valuables so it’s easier to create a list for your insurer in times of crisis. Consider taking photographs as well. Also consider keeping a folder with receipts for major purchases such as appliances, electronics and furniture.
- Create an emergency fund. The financial planning experts at the OSCPA suggest having a three- to six-month cushion of living expenses set aside for any emergency. You also might want to consider having some on-hand cash in case banks are affected by a large-scale disaster.
- Protect your documents. Purchase a fire safe or use a bank’s safety deposit box to protect irreplaceable and important documents. You can store all types of information here – credit card numbers, phone numbers, wills, and copies of things like your driver’s license, passport and Social Security card. You might also consider creating an electronic backup of important documents like tax returns, bank statements, insurance policies, etc. You can store documents on DVDs, CDs, external hard drives or you can use an online electronic storage service.
If you experience a disaster, where do you start to get back on track?
- Contact the Red Cross. One of your first calls should be to the American Red Cross, which may already be on site to help with emergency food and shelter (800-RED-CROSS).
- Contact your insurance company. Depending on the type of insurance you carry, you may be covered to stay in a hotel while repairs to your home are made. Discuss what your policy covers and what it doesn’t, and be sure to get all of the nitty-gritty details on how to make a claim. You may need to take very specific actions like saving receipts and documenting losses in a certain way.
- Conduct an inventory. What was lost in the disaster and what was the value? Prepare a list of what is lost and damaged for the insurance company. Use the pictures and the list you prepared before the disaster to make sure you have identified all the damaged items.
- Contact repair companies. Once you know what your insurance will cover, you can begin contacting the appropriate people to begin repairs or replacement efforts. Note: Be wary of fraud. There are many unscrupulous people who may try to take advantage of people at one of the most vulnerable times of their lives. Check references. Don’t pay upfront or in cash.
- Deduct your losses. The IRS has an entire section of its website devoted to taxpayers who are affected by disasters. Visit www.irs.gov (Disaster Assistance and Emergency Relief for Individuals and Businesses (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Disaster-Assistance-and-Emergency-Relief-for-Individuals-and-Businesses-1) to learn about tax relief after a disaster and learn about disaster preparedness.
“After the shock and grief of a natural disaster wear off, you may find yourself wondering what to do next,” said Daryl Hill, CAE, executive director of the OSCPA. “The tax laws about post-disaster recovery can be complex, so don’t be afraid to ask for help.”
From the AICPA and the American Red Cross, "Disaster Recovery: A Guide to Financial Issues" and "Disasters and Financial Planning: A Guide for Preparedness."