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Are You Ready for the Next Harvey?

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Tips on recovering from—and preparing for—natural disasters.

MoneySmart
By Grace S. Yung

During what may be the worst hurricane season on record, millions across the South have been affected by the damage to homes, vehicles, personal belongings—and ultimately, their lives.

While the emotional toll following natural disasters is significant, many must also deal with the financial cost of rebuilding.

FEMA’s National Flood Insurance Program (NFIP) aims to reduce the impact of flooding on public and private structures by offering affordable insurance to property owners, and by encouraging communities to adopt and enforce floodplain-management regulations.

NFIP allows homeowners, business owners, and renters who reside in participating communities to purchase federally backed flood insurance. These policies cover at least some of the costs to repair flood-damaged buildings and replace contents.

Following Hurricane Harvey, NFIP enhanced the flood-insurance claims process and extended the grace period for paying policy-renewal premiums. In addition, the program implemented temporary changes to rush recovery funds into the hands of NFIP policyholders. FEMA may also provide some relief to those whose vehicles have been damaged by flooding.

Regular homeowner’s insurance policies don’t cover flooding. However, if you have an individual flood-insurance policy through a private company, it may provide some protection. For instance, a private flood-insurance policy can cover out-of-pocket costs that federal flood insurance does not, such as living expenses for those who relocate while their homes are being rebuilt.

As with most other types of insurance, a flood policy is likely to have a deductible that must be met by the policyholder before the coverage will begin to pay out benefits. Typically, there are separate deductibles for your dwelling and its contents. Higher coverage limits are usually available for non-residential structures and their related contents.

Also, even though homeowner’s policies don’t include flooding, they may provide coverage for a leaky roof. Given the harsh rains that plagued Southeast Texas during Tropical Storm Harvey, those who were not flooded might qualify for this type of claim.

As a side note, a new Texas law that went into effect on September 1 reduces the penalty an insurance company may face when a policyholder successfully sues it for a late claims payment.

If you have flood insurance through both NFIP and a private insurer, you can file two separate claims. However, keep in mind that the payment you receive from federal disaster assistance is limited to losses that are not covered by a private flood insurance policy.

Regardless of whether you have flood insurance, there may be other outlets available for relief. For instance, you may be eligible for a federal grant that can be used for a variety of things, such as emergency home repairs and/or money to pay for temporary housing. In addition, as a homeowner, you may be able to borrow up to $200,000 through the federal Small Business Administration to repair or replace your disaster-damaged primary residence. Likewise, as a homeowner or renter, you may borrow up to $40,000 via the SBA to repair and/or replace damaged personal property.

SBA is also providing an automatic 12-month deferment of principal and interest payments for SBA-serviced business and disaster loans that were in “regular servicing” status on August 25, in the primary counties designated as federal disaster areas from Hurricane Harvey. Also, the IRS has announced that the October 16 deadline for filing federal tax extensions has been changed to January 31, 2018, for those who live in disaster areas.

Since nobody can predict when a disaster will strike, the time to make sure that you have the right types and amounts of financial protection is sooner rather than later.

Paying insurance premiums is not something most people enjoy, but ensuring that your home and other assets are protected is essential—especially for those who live in areas that are prone to natural disasters. In this case, the “cost” of the premium can be well worth it if and when disasters strike.

This article appears in the October 2017 edition of OutSmart Magazine. 

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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