Protect Your Property from Natural Disasters
A natural disaster can be a devastating blow to your finances. Use these checklists to help minimize any additional financial losses.
Protect Your Property
If you are being asked to evacuate the area and authorities allow you to enter your home, be sure to:
Collect your important financial documents along with your valuables. You will need them to file insurance claims, pay bills and take care of family members. Important documents include:
- legal certificates
- powers of attorney
- insurance policies
- Social Security cards
- your checkbook
- bank account information
Get a visual. Take pictures and/or video of your damaged property.
Call your insurance agent as soon as possible to find out exactly what to do and what information is required to make a claim. Leave a contact phone number if your home is uninhabitable and you are staying elsewhere.
Separate damaged and undamaged items until a claims adjuster inspects them. Protect your property from further damage by making temporary repairs (such as putting a tarp over a damaged roof).
Save receipts for repairs and temporary lodging to submit to your insurance company. If you are not fully reimbursed for these expenses, they may be tax-deductible.
Keep copies of all correspondence with the insurance company and provide them with a detailed list of damaged property. The claims process will be much easier if you take the time, before a natural disaster occurs, to photograph or videotape the contents of your home and list the brands and serial numbers of appliances and electronics equipment.
Look to relief organizations. Contact the American Red Cross. The Red Cross can provide emergency shelter, meals, clothing, medical assistance and referrals to government and nonprofit organizations for additional services.
Work With Your Employer
Disability benefits. If you or a family member is injured, you need to begin the process of applying for any available employee-sponsored disability benefits.
Family Medical Leave Act. You may be able to take advantage of the Family and Medical Leave Act if you are unable to return to work in the near future because you are caring for an injured family member. This law applies to companies with more than 50 employees.
paying your bills on time protects your credit rating. But, considering the circumstance, your creditors might be willing to work with you on a delayed payment schedule if necessary.
Prioritize your bills. Keep in mind that insurance policies and mortgage or rent payments are the top priority.
Consider stopping some bills immediately. For example, you can contact your utility, telephone and cable providers to halt services on the property you have vacated. Before cancelling the service though, make sure you ask about termination and reconnection charges.
Tax Relief for Federal Disasters
For victims of natural disasters such as earthquakes, floods and tornadoes, there are federal income tax deductions to offset some of the financial loss, but only if it is officially declared a Federal disaster.
Casualty losses are deducted on
Schedule A as an itemized deduction. After the first $100 of loss, which is nondeductible, the remainder of a loss that is not reimbursed by insurance is allowed to the extent that it exceeds 10 percent of a taxpayer’s adjusted gross income (AGI). Under the new tax law in 2019, you can only claim losses from a federally declared disaster. You are not allowed to deduct losses from personal casualty and theft losses.
If the president declares an area affected by a natural disaster a Federal Disaster Area, there are automatic extensions of the time for filing tax returns and paying taxes, waived penalties for late filing and payment of taxes, and special mailing addresses for faster processing of tax returns from disaster victims.
Under normal circumstances, a casualty loss is deducted on your tax return for the year in which the event occurred. However, in areas which the president has declared to be a Federal Disaster Area, victims have the option of taking their entire loss on their prior year’s tax return. If they have already filed a prior year return, they can file an amended tax return on
Form 1040X to get a refund to help pay for disaster-related expenses. The IRS recommends writing “Disaster, (name of city or county and state)” in red ink at the top of the 1040X form. For additional information, consult IRS Publication 584.
[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by National Endowment for Financial Education.]