Up to 4 feet of muddy water oozed into Patricia and Robert Walker’s three-bedroom home in northern Kentucky after torrential rains sent the nearby Licking River flooding through their rural town.
Almost everything inside is ruined. Outside, their waterlogged 1989 Plymouth Acclaim is history.
Yet the Walkers consider themselves lucky. Besides the fact no one was hurt during the early March storm, they have a temporary place to live, they’re able to buy new clothes and furniture with charitable donations - and they have flood insurance.
“We didn’t even have flood insurance until July; when we took out a second mortgage, we were required to get it,” said Mrs. Walker, 49, of Cynthiana, about 50 miles north of Lexington.
Thousands of others whose lives were disrupted by winter floods or tornadoes also face a lengthy rebuilding process that will continue long after the waters have receded and winds died down.
How well they recover will depend partly on how well they’ve prepared for the financial fallout of a natural disaster. That means carrying adequate insurance coverage, maintaining a household inventory, keeping important documents in a safe spot and having an evacuation plan.
“It doesn’t require any big process,” said Rocky Lopes, who heads the American Red Cross community disaster education division. “It’s just a matter of taking some time and saying. ‘Here’s what I need.’ A lot of people are surprised by disaster simply because they never thought about it.”
Adequate insurance coverage should top the planning list.
Homeowners’ and renters’ policies cover losses due to fire, theft, vandalism and certain natural disasters, but not all. Separate policies must be purchased, for example, to cover floods and earthquakes. Many mortgage lenders will insist on it.
Additional coverage also is needed to protect certain valuables such as jewelry, home office equipment or collectibles, since standard policies place limits on such losses.
At the very least, homeowners should have insurance that pays to replace their home up to the limits spelled out in the policy. The best policy, though, is one that guarantees to rebuild a home as it was before a disaster even if the cost exceeds the policy limit.
Peter Wells, vice president for Marshall & Swift in Princeton, N.J., which provides cost data for insurers, estimates 75 percent of all homeowners have inadequate coverage because they fail to upgrade their policies regularly to reflect home improvements. He recommends they do so every three years.
Another important financial safeguard is a home inventory listing all furnishings and personal possessions. It is crucial to back claims for losses.
An inventory can speed up insurance claims by helping prove the value of personal possessions, or that they even exist.
A home inventory also can aid those who may qualify for tax deductions for losses not compensated by insurance. Last year, 106,000 returns claimed property-loss deductions totaling $1.67 billion, according to IRS spokesman Steve Pyrek.
Make a list of all items in each room, their condition, purchase dates and price, model and serial numbers. Receipts and canceled checks also should be set aside, along with any appraisals.
Insurance experts recommend that even less expensive items, like linens or clothing, be listed, along with any family heirlooms. The attic, basement, garage and home exterior also shouldn’t be overlooked.
To back up the written inventory, use photographs or make videos.
Copies of the inventory and accompanying photographs, negatives or videotape, should be stored in a safe place, such as a safe deposit box or at a relative’s home out of town.
Other important documents to store away: tax returns, insurance policies, stock and bond certificates, wills and birth and marriage certificates.
Lopes said creditors should be contacted as soon as possible. “Most will be very willing to work with people who are honest with them. Sometimes they’ll extend a payment plan, waive the due date or finance charges. I’ve known some creditors … who have actually waived bills.” xxxx COPING WITH DISASTER To financially prepare for a disaster: Conduct a household inventory. Take photographs or videos of your personal possessions to back up ownership claims. Store away copies of important financial documents. This can be done in a safe deposit box or at the home of an out-of-town relative. Maintain adequate home insurance regardless of whether you own or rent. Don’t forget about the car. Have an evacuation plan. If you know, for example, that a storm is likely to hit your area, make temporary living arrangements and keep on hand an “evacuation box,” with some cash, copies of important documents and a list of contacts such as doctors, insurance agents and creditors.
To financially recover from a disaster: Assess the damage. Make a preliminary list of damaged property, taking photographs or videos if possible, and compare that to the pre-disaster inventory. If you don’t have one, make one up from memory as soon as possible. Promptly file an insurance claim. Claims usually are settled in the order received, with the exception of severe cases. Work with the claims adjuster by providing a damage list, which can be updated later. Insist on additional adjusters or hire a structural engineer if you’re unsatisfied with the initial damage estimates. Reconstruct lost documents. For example, contact lenders and contractors to determine the value of home improvements you’ve made or check municipal records for property values. A “Blue Book” or car dealership can help determine the value of your vehicle. Notify creditors. If you’ve lost your bills or expect you’ll have difficulty making payments, explain the situation and try to negotiate a repayment schedule over a longer period of time. Most creditors will be accommodating. Obtain loans, grants. Several government, nonprofit and private loans and grants may be available following a disaster. Among the many sources: the Federal Emergency Management Agency and the American Red Cross disaster relief. Take a tax deduction. The Internal Revenue Service allows taxpayers who itemize their returns to take a deduction for personal property that’s stolen, damaged, or destroyed in an accident or by an act of nature. The deduction, however, is for losses not compensated by insurance.