For those living on the Eastern seaboard still cleaning up from Hurricane Sandy, we at the Financial Planning Association, wish you and yours well during this difficult rebuilding time. Although, thankfully, not a ‘hurricane’ magnitude like Katrina, Sandy demonstrated that we can never under estimate the power of Mother Nature to do damage! So we are always reminded to take appropriate safeguards before, during and after the casualty or disaster event.
A good personal risk management regimen should always include an annual review of your personal and business insurance coverage to ensure that dollar amounts of coverage are sufficient for risks that you or your business might be exposed to. Not only do we want to know how much coverage we have, we also want to know what our deductibles and co-pays are so that we know what kind of a ‘hit’ our cash flow would take before coverage commences if we were to sustain some sort of loss. Property damage, liability insurance and personal content are standard provisions of auto and home policies but what about coverage for ‘collectibles’, ‘valuables’ or other special risk exposures to property or assets like flood, earthquake or other natural disaster(s)? Rather than writing an inventory of everything we have in our home, do we have a video of all those things in our home to help us with substantiating a loss should we incur one? Like with changing the batteries in your smoke detectors in the home annually, review your risk management needs to see if you have the right insurance coverage and if there might be cost savings to coordinating policies. Make sure what you want to be insured in fact is insured – that dirt bike you use off road on the weekends or those jet-skis the kids use on the lake. As stated above, review deductibles and or cost sharing obligations of your coverage to ensure that (1) you are not buying too much first dollar of out of pocket coverage, weighed by (2) the ability of your cash flow and emergency funds to sustain a major disaster recovery hit. If you live in low lying areas that could be subject to flooding (again, natural disasters), you will find that homeowner’s policies generally do cover flooding you should consider buying that coverage separately. You may find that the sequence of the events that cause the destruction may cause difficulty in triggering coverage i.e. “did the fire cause the flooding to occur or did the flooding cause the fire to occur.”
As a survivor of ground zero during the Northridge Earthquake of January 17, 1994 at 04:31 am, yeah, you don’t forget stuff like this; I don’t think I can say much more than you already know for yourself — BE SAFE! Make sure your loved ones are ok, that gas lines have been shut down and look out for live electric wires, wavering or fallen objects, glass and sharp objects, etc. etc. Be glad that you have been prepared by sleeping with that flashlight and hard bottomed shoes next to your bed. Make sure your post-event energy supplies are protected so that in the event of power outages you will be able to have some power for essentials.
Make sure your emergency preparedness kit is with you and initiate your disaster plan as you had prepared it following contingency plans, if required. Having to endure a disaster might be out of our control but having had the opportunity to prepare for one, even an earthquake, is not.
Once the casualty event or disaster has passed and we ‘emerge’ from our ‘safe place’ we will want to secure property, if we are able, from sustaining any additional damage. Taking a post event video to compare with the pre event video mentioned above is a great tool for filing for losses. Most homeowner’s policies will have temporary, if needed, living expense provisions and every carrier will have claim adjustors and other representatives on site as quickly as possible to move your recovery along. You have rights to seek independent help with assessing your damages and valuing your claim but in most of my experiences, both personally and with what I have seen with clients, carriers have been, again for the most part, fair in their payouts. Look out for individuals or companies that come to take advantage of those in desperate need. Unlicensed contractors, price gougers and the like will be there to take advantage of that urgent nature of your need so please be careful and protect yourself from being taken advantage of!
If you are in need financially or otherwise, there are many disaster relief or aid organizations out there. FEMA is the major federal source of disaster relief but do not overlook other State or Local benefits that might be available, such as the County’s Housing Authority or similarly named Department. In Los Angeles the LA Housing Authority made funds available for post-earthquake repair to those who qualified. Additionally, the Employment Development Department extended unemployment benefits to those whose workplace needed to be rebuilt before the employees could return to work.
Casualty losses not covered by insurance might get you some tax relief by allowing you a Casualty Loss Deduction. The ‘tax mechanics’ of the deduction will differ depending on whether the ‘loss’ property was a business asset or a personal asset, but nonetheless, there may be some ‘tax benefit’ you will get.
In any case, the most important thing to remember about a casualty or disaster is that it is not our possessions and material holdings that matter the most but rather it is the wealth of love and life that we get from having family and friends around us that we care about and with whom we are comforted. Wishing you and those around you the very best – BE SAFE AND HAPPY HOLIDAYS TO ALL !
David Bergmann, CFP®, EA, CLU, ChFC
The David Bergmann Group
Marina Del Ray, CA