This information is designed to help you become more financially informed and prepared for a disaster (pre-event preparedness plan) or to help you deal with the aftermath of a disaster (post-event recovery plan).

If you are in the planning rather than the recovery mode, it is important to take some time to prepare for the potential financial losses that could result from a major disaster.

General Tips

• Review your insurance policies at least annually.
• Update your property inventory list and keep a copy of the list in a safe deposit box as well as with a loved one in another state.
• Make sure important papers are stored in a safe deposit box.
• Create an evacuation box with a lock that can be retrieved quickly should you have only a few minutes to vacate your home.
  • Include some cash, traveler's checks, rolls of quarters, credit cards, copies of insurance policies and insurance agent contact information (homeowners, renters, earthquake, flood, wind, auto, health, disability, long term care, life insurance, and umbrella liability policies), photograph negatives, emergency contacts, names of prescriptions and prescription refill numbers, medical and immunization records, pay stubs, rental agreement/lease, safe deposit location and key, warranties & receipts for major purchases, copies of previous year's tax returns, current year supporting documentation to complete taxes, a list of financial account numbers and phone numbers for bank and investment accounts, credit cards, mortgages, backups of computerized financial records and home computer files which include digital photographs. In addition, include a list of other items to quickly grab such as cell phone and charger, medicine, jewelry and other small valuables and a battery powered radio with extra batteries).
• Maintain duplicate copies of important papers that are in your evacuation box with your attorney and a loved one in a distant geographic area.
• Establish an emergency reserve fund with 3-6 months of living expenses placed in a liquid account (i.e. money market account).
• Avoid making immediate financial decisions that will have long-term consequences until some time has passed and emotional reactions have eased.

Insurance

Financial Stability
Purchase insurance only from an insurance company that has superior financial ratings (i.e. A++ or A+). When making insurance comparisons, make sure policies have identical features and insurance companies are rated similarly. Do not purchase insurance policies based solely on cost. Financial strength and the features of the policy should be considered first.

Reviewing Coverage
Insurance policies are very specific with regard to coverage. Review the actual policy closely (not just the declaration page) and make sure policy coverage is understood. Pay special attention to the section entitled "Duties after a Loss".

Review your insurance coverage to make sure you have full replacement cost coverage which generally will pay for like kind and quality property. Policy holders need to continually review and adjust their coverage as property replacement values increase. It is also important to notify your insurance agent when any new improvements are made to a home to ensure they are covered. Make sure your policy covers the costs of meeting new stricter building codes when rebuilding.

Damage from a hurricane is generally covered under a standard homeowner's policy, but flooding is not. A separate flood insurance policy must be purchased. You may wish to consider sewer-backup insurance which will cover damage that is caused by water backup into your home from an overloaded sewer system, septic tank, or sump pump.

Rising Deductibles
Many insurance companies have increased the deductible policy holders are required to pay before insurance coverage begins if damage is hurricane related. This may include a higher out-of-pocket cash deductible as well as an increased deductible for a percentage of the home's value (i.e. 2 to 5% of a home's insured value).

Loss of Use or Additional Living Expense Provision
Many renters and homeowners' policies offer coverage for 12 months of living expenses if a policy holder can no longer live in their home due to a disaster. It is important to save all receipts for living expenses in order to be reimbursed. In the future, consider a policy with 24 months or unlimited coverage for more flexibility.

For Those Without Insurance
The Federal Emergency Management Agency (FEMA) provides funds for temporary housing, home repair and replacement, auto repair, moving, and storage. FEMA typically sets up operation centers in disaster areas to process applications and determine grant eligibility. Assistance from FEMA is frequently in the form of loans.

Flood Insurance

For homes that are damaged or destroyed by flood, homeowners and renters insurance does not cover the destruction.

Federal Emergency Management Agency
Separate flood insurance covering damage from a rise in the outside water level due to broken levees, rain runoff, storm surges, mudslides, or an overflowing river must be obtained through an insurance company or the Federal Emergency Management Agency (FEMA).

National Flood Insurance Program
The government's National Flood Insurance Program (NFIP) underwrites flood insurance policies. Any property owner of insurable property may purchase flood insurance coverage, provided that the community in which the property is located is participating in the NFIP. Make sure to obtain coverage for the building in addition to contents coverage. There is generally a 30-day waiting period before coverage is effective.

Flood Insurance Rate Map
To determine the risk of flooding in an area, check a flood insurance rate map. This map is available from insurers and lenders and will identify the proximity of a location to a flood plain.

Earthquake Insurance

Earthquake insurance is sold as an additional coverage to a homeowner's policy. The State of California requires insurers to offer earthquake insurance if they sell conventional homeowner's insurance.

California Earthquake Authority
The California Earthquake Authority (CEA) is the world's largest earthquake insurer. Policies through CEA are designed to provide money to rebuild homes that have significant damage. There are 18 participating insurance companies. Earthquake policies are also available through private insurance companies that are not part of the CEA plan.

Excluded Items
Certain items are excluded from earthquake insurance including:

• Unattached Garages
• Swimming Pools
• Spas
• Patios
• Fences
• Awnings
• Computer Files
• Glass and Chinaware

Basic Policy
The basic CEA policy has a 15% deductible but covers a home's structure up to the level on the homeowner's policy. Household contents are covered up to $5,000 and the policy pays for $1,500 in emergency living expenses.
CEA also offers a supplemental or "wrap-around" policy for an additional premium that provides a 10% deductible with contents coverage up to $100,000 and living expense coverage up to $15,000. Premium rates vary depending on the age of the home and proximity to unstable soil and faults.

To Purchase or Not to Purchase
To figure out whether to purchase earthquake insurance, review the factors that insurers use to set rates including seismic proximity, seismic activity, soils, land, and construction. It may make better sense to spend money to retrofit a home. There are special construction loans, grants, and possibly reduced insurance rates for doing so.

Renter's Insurance
A renter's insurance policy should be obtained for those who rent an apartment or home. Renter's insurance will cover damage to furniture, clothing, electronics, and other personal belongings. A special insurance policy may be needed to protect renters that live in geographic areas subject to earthquakes and floods. A renter is under no obligation to stay in a rental unit if it falls short of meeting essential living conditions such as working utilities and living quarters that are structurally sound and clean. Under state laws, you generally should be able to receive your security deposit back if your rental unit is not in a livable condition.

Initiating an Insurance Claim
Check with the insurance agent before filing a claim. Claims need to be filed with the insurance company that issued the policy. Be thorough and meticulous when reporting damage. Find out your insurance policy's time limit on making claims and make sure you meet the filing deadlines. It is important to file a claim with your insurance company even if you think it will be denied. Not filing a claim may prevent you from receiving federal assistance funds.

Call your insurance agent or a hot line that has been set up by your insurance company as soon as possible so the claims process can begin. Keep in mind that many insurance companies set up claims processing operations at federal emergency centers for those that cannot make contact with agents. In addition, send a written follow-up letter via certified mail with return receipt to your insurance company informing them of the loss.

If it is possible, without jeopardizing you or your family's safety, take pictures and/or videotape of all your property, regardless of its condition. The following are some helpful strategies to remember what property you had:

• Close your eyes and visualize each room, then record the contents.
• Ask friends and relatives for any pictures and videotape they may have of your home and its contents.
• Review personal inventory checklists and check off items you had.
• Browse store shelves to remember make and model of particular items.
• Inventory all property that has been damaged, including vehicles. List when and where it was acquired and how much it cost. It is ideal if your list contains model names and serial numbers. This inventory information is best stored with a relative in another geographic location and in a safe deposit box.
• Do not discard any property until an insurance adjuster has visited the site.
• If possible, make only temporary or minor repairs to prevent further damage to property from the elements. These repairs are generally allowed by most homeowners' policies so it is important to save all receipts to receive reimbursement or to qualify for a tax deduction.

Keep a log of all conversations.

Insurance Adjusters
Insurance adjusters are in charge of reviewing and investigating a claim and then making a recommendation to the insurance company. The insurance company then makes a decision about the claim and informs the insured of their decision. Make sure everything is in writing including claim decisions by an insurance company.

Private adjusters work directly for the insurance company as either an employee or contractor. Public adjusters work on behalf of the individuals who have insurance. Both of these types of adjusters appraise the loss and determine the damage amount. However, public adjusters generally require you to sign a binding legal contract for a fee or percentage of the claim payment (typically 10% of the claim) which is deducted from any insurance proceeds paid. In addition, some public adjusters promise to achieve a better insurance settlement; however, this does not frequently occur.

It is important to check the identification of an insurance adjuster to make sure they are not a scam artist. Ask to see three ID's when the insurance adjuster arrives: (1) their badge allowing them to be in a disaster area; (2) an ID card that identifies them as an insurance representative; and (3) their driver's license.

Repair Work
Strive to negotiate the true cost of making repairs and/or replacing your home by having a qualified building professional determine the estimated cost. Be wary of an insurance company that offers to waive the deductible if you agree to utilize a contractor it recommends. Make sure to do your own due diligence on an insurance company's contractor recommendation as well.

Settling a Claim
Review settlement language carefully. Do not sign a Proof of Loss form or accept an insurance company check that contains the words "full, complete, and final settlement". There may be other expenses that may be incurred following the repair or replacement of property that an insurance company should pay.

Contesting Decisions
Do not be afraid to contest an insurance company's decision even concerning minor issues. Moreover, the insured does not need to accept the first amount offered. However, research may be required to demonstrate an increased payment is warranted. If an individual is having difficulty settling a claim, it is best to work with the insured's insurance agent. A good insurance agent will be able to offer assistance.

Complaints
If complaints about claim decisions are not addressed, escalate it to the Claims Department Manager or insurance company's President. In addition, consider contacting your state insurance department for assistance before going to court. To find a state insurance department visit the National Association of Insurance Commissioners website. If necessary, contact an attorney for assistance.

Home Repairs

Be very careful when hiring contractors to make home repairs after a disaster. All too often consumers are overcharged by contractors who perform poor work or fail to begin or complete a project.

Referrals
Avoid contractors that sell their services door-to-door claiming reduced prices due to leftover materials from another nearby job. Instead, ask friends, relatives, and business associates for referrals. Referrals can also be received from a local lumberyard or other material supplier. Strive to have at least three independent contractors bid on your home repair project.

Qualifications
Request and check qualifications, experience, and obtain references from all referrals received and interview each candidate. Confirm there is no cost to receive an estimate prior to letting a person enter your home. Ask for identification to verify the identity of contract workers. Review their portfolios and visit completed projects.

Licenses
Check general contractors to make sure they are bonded and have current and valid business and state contractor licenses. There is little or no recourse if an unlicensed contractor does the work and you are not satisfied with their performance. In addition, make sure there are no complaints or suspensions on file for the contractor through your local area Better Business Bureau and Home Builders Association, insurance agents, and claims adjusters.

Contract Provisions
Make sure the contractor provides a written and detailed contract of the work to be performed, including the total cost, any oral promises made by the contractor, guarantees on the labor and materials that will be used, and when the work will be completed. Make sure the materials used are not left over from a previous job since those are typically poor quality and/or meant to scam the consumer. Analyze and understand the reasons for price variations and terms between competing contracts. Avoid contractors who recommend spending large amounts of money on temporary, rather than permanent repairs. Have a competent friend, relative, or attorney review all contracts before you decide on a contractor and sign a contract.

Prior to signing the contract, request that the contractor secure a performance bond for the full amount of project in case the contractor does not complete the job. Moreover, if the contractor is subcontracting any part of the project, request a payment bond from the contractor. This will protect you from any liens assessed to your property by the subcontractors if the contractor does not pay them. In addition, ask the contractor for proof of liability and workers' compensation insurance. Verify with their insurance company and the applicable state workers' compensation division to verify current coverage. Moreover, request that the contractor provide you with a certificate of insurance naming you (the property owner) as an additional insured. Upon signing the contract, make sure to retain a copy of the contract for your files.

Consumers are protected by a three-day cancellation period for home repair contracts. If you choose to cancel a contract, be sure to do so in writing.

Payment
Avoid working with any contractor who demands payment up-front. A payment of one-third of the total cost is considered standard. However, some states set a limit on the amount of a down payment that can be requested to be paid upfront prior to commencement of a home repair project. Do not pay with cash. Instead make payments with a check, money order, or credit card and request a receipt after each installment payment is made to keep with your records. Note that if your insurance policy has a large deductible, many contractors will require proof that you can pay the deductible (i.e. from a credit line or checking account balance). In order to maintain financial leverage, do not make the final payment to the contractor until you are completely satisfied with their work. The contractor should then provide you with a signed lien waiver in exchange for payment.

If a loan is being used to fund repair work, use caution when collateralizing your home. If you cannot pay back the loan, you may be in jeopardy of losing your home.

Clarification of Taxation Issues

There are many tax law provisions and revenue rulings that clarify issues taxpayers face following a disaster including:

Income Exemptions & Exclusions

• Generally federal, state, and local government disaster relief funds received are free of income tax.
• Revenue Ruling 93-43 clarifies that insurance proceeds for increased living expenses resulting from the loss of use of a principal residence damaged or destroyed by a casualty are excluded from gross income. The increase in living expenses is determined once, when the taxpayer regains use of a principal residence, rather than at the end of each intervening tax year.
• Revenue Ruling 95-22 clarifies that proceeds receive for the loss of a home and scheduled personal property can be reinvested in the home and/or contents, and restates that money received for contents is exempt from income, regardless of how the money is used.

Income Deferral

• Revenue Ruling 96-32 allows the proceeds of the sale of a lot to be considered part of the involuntary conversion and deferrable under Section 1033(h)(1) if certain conditions are met.

Deductible Expenses

• If a taxpayer's principal or second residence has been destroyed by a casualty such as a fire, earthquake, flood, etc., it can still be a qualified home if it is either rebuilt or the property is sold within a reasonable period of time after the home was destroyed. Thus, interest paid on the mortgage would remain deductible after the destruction.
• Unreimbursed medical expenses are deductible to the extent that they exceed 7.5% of adjusted gross income.

Earned Income Credit

• Low income taxpayers may be eligible for the Earned Income Credit. See IRS Publication 596 entitled Earned Income Credit for more information.

Casualty Losses

A tax-deductible casualty loss must result from a sudden, unusual or unexpected event. However, if insurance paid for a total loss, then casualty loss income tax deduction cannot be claimed. Only uninsured and unintentional casualty losses are deductible.

Disaster Declaration
When the President declares a disaster, affected taxpayers can deduct their uninsured casualty loss either in the tax year the event occurred or in the previous tax year (usually resulting in an income tax refund).

Deductibility
These losses are deductible to the extent that they exceed 10% of AGI and $100 for each occurrence and the insurance company cannot reimburse them. In addition, the casualty loss deduction is limited to the basis in the property.

If there is an existing insurance and an individual elects not to submit the claim to the insurance company, the individual is not allowed to use the casualty loss form.

Overlooked Losses
Many individuals do not realize casualty losses include the replacement cost of trees and shrubs damaged by storms or fires; automobile accidents that were not negligent; loss of bank accounts due to insolvency of a bank; fire damage, earthquake damage, storm damage from hurricanes and tornadoes, flood damage, and theft losses.

Audit Caveat
Note that the IRS frequently audits casualty losses. The best proof of loss includes repair bills or estimates if the work has not been performed yet, police reports, newspaper articles, photos, and appraisals of before and after values. Use IRS Form 4694 to claim a personal casualty loss.

Managing Your Finances

Readily Available Cash
It is important to have some cash available to make purchases for food, shelter, repairs, and other expenses during the weeks and possibly months following a disaster. Income may stop if you cannot work.

Remember fees will be assessed to replace certain documents such as birth certificates, driver's licenses and passports. In addition, cash will be needed to cover small uninsured losses to property as well as any deductibles or co-pays required by insurance policies (health, home, and auto).

To help stay solvent, consider the following:

• Keep a small amount of cash or traveler's checks in small denominations at home in a place where you can get at it quickly in case of a sudden evacuation. A disaster can shut down local ATMs and banks.
• Tap into emergency funds that have been set aside. Financial professionals generally recommend setting aside 3 months of cash in an easily accessible, liquid type of investment such as a money market account if there are two income earners in the household. For a sole income earner in a household, it is generally recommended that 6 months of cash be set aside in a liquid account. Make sure that the funds are with a financial institution with locations outside of your local geographic area. Rebuild your emergency funds as soon as possible following a disaster.
• Try to find ways to increase income. Moreover, reduce spending as much as possible and use any cash reserve funds that have been set aside first. For example, cancel services such as utilities if your property is destroyed.
  

Other Available Sources for Cash

• Apply for any federal, state, and local government disaster relief funds that are available.
• Ask your insurance company for a cash advance rather than taking a cash advance on a credit card. Insurance companies will typically grant cash advances for certain items of coverage prior to settlement of a claim.
• Consider tapping the accumulated cash value of a whole life insurance policy. However, keep in mind that the insurance may assess a fee and will charge interest on the outstanding loan amount. In addition, part of the cash value proceeds may result in taxable income. Some life insurance policies will waive the premium payment if the policy holder becomes disabled.
• Financial planners generally encourage consumers to seek funds from other sources before tapping retirement plans and/or equity in a home through a reverse mortgage.

Credit Cards & Other Loans
Keep your credit cards paid off and only utilize them if necessary. Consider other loan sources instead of a high interest credit card to make necessary purchases. If you cannot make the minimum payments on credit cards and other loans, contact creditors immediately. Be candid with creditors and explain the specific circumstances behind the inability to pay the required minimums. Send follow-up written correspondence to confirm any verbal conversations. Try to negotiate a repayment plan that you can manage.

Lenders, including mortgage companies and student loan lenders, may allow the postponement of payments through a forbearance agreement. If you cannot pay all your creditors a minimum payment, make sure to establish a priority of payments to creditors that have a direct affect on your family's health and security, such as housing, utilities, food, transportation, and health, disability and life insurance.

Disaster Assistance

There are numerous special programs and services available when a major disaster area is declared, including private insurance policies and federal emergency grants or loans.

Housing Assistance
Look into any special Section 8 or rent rebate programs available through the local housing authority. Emergency shelter and temporary housing is generally provided by emergency management and disaster relief organizations.

The Federal Emergency Management Agency (FEMA) provides housing assistance to those whose homes are damaged or destroyed by a disaster without insurance. It is important for those who have insurance to still apply for a FEMA grant even though it will generally be denied. Keep the denial record as proof of filing for assistance in case additional living expense funds received from the insurance company are exhausted.

Unemployment Assistance
Apply for state unemployment benefits. Note that these benefit payments are taxable.

FEMA provides Disaster Unemployment Assistance (DUA) via weekly benefits to individuals who are unemployed and are not eligible for regular unemployment insurance compensation.

Disability Assistance
If an individual is disabled by a disaster and wishes to continue working, the Americans with Disabilities Act (ADA) may protect against job discrimination.

In addition the Social Security Administration (SSA) provides monthly benefits to eligible disabled individuals who are unable to work through the following programs:

• Social Security Disability Insurance (SSDI)
• Supplemental Security Income (SSI)

Keep in mind, an individual must apply and qualify to receive benefits. Visit the Social Security Administration website for more information on these programs.

Veterans who become disabled from a disaster may be eligible for monthly disability benefits. Visit the Department of Veterans Affairs website for more information.

Essential Estate Planning Documents

It is important to put in place and continually review the following estate planning documents.

Will
A will provides a legal declaration of what a person wants done with their property or estate upon death. This document is also used to appoint guardians for any minor children or family members with special needs as well as to nominate someone to serve as executor to settle an estate. Keep a copy with your attorney and with a loved one located in another geographic area.

Durable Power of Attorney
A durable power of attorney is a legal document that appoints someone to pay bills and manage finances should a person become ill or incapacitated. A copy of this document should also be kept with your attorney and with a loved one located in another geographic area.

Health Care Proxy
A health care proxy is a legal document that appoints someone to make health care decisions on your behalf if you cannot make those decisions on your own due to illness. Make sure your attorney and your doctor have copies of this document.

Living Will
A living will is a legal document that states what types of medical treatment are desired and not desired in case of inability to communicate wishes due to illness. Make sure your attorney and your doctor have copies of this document.

Charitable Donations

Be on guard when donating to a charity. Do not respond to phone or email solicitations, especially to anyone asking for personal financial information on the phone or calling to pick up an unsolicited donation. Instead, call or mail a charity directly.

Research & Confirm
Research the charity by visiting its website and other websites such as the Wise Giving Alliance (sponsored by the Better Business Bureau). Make sure the organization's mission matches your own reasons for giving. Request and review the charity's annual report and tax returns.

Beware of Telemarketers
The Chronicle of Philanthropy, reports that Americans contribute more than $1 billion every year to charities through for-profit companies, typically through telemarketers.

However, only about one-third of donations actually fund nonprofits. Charity telemarketers may keep up to 80% of the money they raise to pay for fundraising and administrative costs. Whereas, 100% of the money raised by volunteers usually goes to a charity. Determine what percentage of your donation will actually go to the charity.

Qualified Organization
Confirm the charity is a qualified organization. To be eligible for an itemized tax deduction, the gift must be made to a qualified tax-exempt charity.

Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.

Ask the organization for a copy of the group's exemption letter or call the IRS at (800) 829-1040 to see if the organization is a qualified tax-exempt group.

Payment
Make check payable to charitable organization rather than an individual soliciting. Avoid making cash donations.

Scams & Fraud

Be aware of scam artists that emerge to take advantage of individuals during a disaster such as an earthquake, volcanic eruption, hurricane, flood, or terrorist act. Some of the more common scams that occur following a disaster include:

• Door-to-door and telephone sales
  
• Job scams
  
• Advance-fee loan scams
  
• Home repair schemes
  
• Bogus fundraising for disaster relief
  

Do not respond to unsolicited emails soliciting for disaster relief funds. Instead, personally contact well-known charities that have a good track record in providing direct assistance with disasters as well as charitable organizations that focus on long-term recovery and rebuilding efforts.

Be careful if approached to submit a phony insurance claim. Committing insurance fraud is a felony crime in many states.

Organizing Documentation

It is very important to organize documentation and keep it in a secure place. The type of documentation will dictate whether it should be kept in a safety deposit box or fire proof safe at home.

Safety Deposit Box

Documentation Check off when placed in safety deposit box or write N/A if not applicable Marriage license, divorce decrees, child custody and adoption agreements   Birth and death certificates and naturalization papers   Deeds & titles (i.e. home and car)   Appraisals of jewelry and artwork   Certificates for stocks, bonds & other investments   Copies of driver's licenses   Social Security cards   Copies of insurance policies   Military records, veterans papers and passports   Copy of home inventory list, appraisals and receipts with photos and/or videotape of everything owned

Consider renting a safe deposit box far enough away from your home to protect against a disaster in your surrounding geographic area.

Fire Proof Safe at Home

Documentation Check off when placed in safe at home or write N/A if not applicable Medical directives (i.e. healthcare proxy, durable power of attorney for healthcare, living will, etc.) Power of attorneys and/or signature authorizations for all accounts   Funeral and burial instructions (note if prepaid)   Location of cemetery plot and its deed or certificate (if applicable)   Names & contact info. for named guardians of minor children (signed & dated paper or stated in will)   Names, addresses and phone numbers of: 1. Physician(s) 2. Accountants for last 7 years 3. Attorneys 4. Banking officers 5. Brokers & Realtors 6. Financial advisers 7. Insurance agents   Wills & trusts (store originals at attorney's office and also give a copy to one's executor informing them of the name of the attorney holding the originals)   Social Security numbers   Names of financial institutions, branch locations, and account numbers: 1. Money market, savings, & checking 2. Brokerage accounts 3. Mutual fund accounts 4. Company plans (401(k), 403(b), 457) 5. IRAs 6. Certificates of deposit 7. Credit card accounts   All real estate documentation (actual deeds should be in safety deposit box).   List of all securities owned in each account, dates bought, # of shares, prices, and copies of confirmation slips for all security purchases. Keep copies of correspondence from companies on stock dividends, splits, rights, and reorganizations, since these may change a security's tax basis.   Home inventory list of everything owned, value, who holds title, and designated beneficiary (if applicable). Note items of significant value (art, antiques, coins, etc.)   All loan statements and supporting loan documentation (real estate, vehicles, personal loans, etc.)   List anything in one's possession that has been borrowed from others-also noting if others owe one money or have borrowed property   Insurance policies (life, health, disability, home, etc.) along with endorsements including employer group insurance certificates where the employer has the master policy   All previous employers' names and addresses, including governmental employment   Income tax returns and backup records (past seven years) and any gift tax returns ever filed   Checkbook registers, statements and canceled checks for the past 7 years (it is important that the executor be able to locate files that show debts have been paid in full)   List of items and information that has been placed in all safety boxes identified by location   Location and identifying number of all safety deposit boxes, key locations and lock combinations