Financial recovery from a natural disaster

See steps to take to get your financial house in order—before and after a catastrophe.

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Key takeaways

  • Document your losses carefully for your insurance claims.
  • You may be eligible for government funds to help pay for expenses not covered by insurance.
  • Call your lender right away if you’re struggling to pay your mortgage.

Floods, hurricanes, tornadoes, wildfires, earthquakes—natural disasters can affect anyone. And their toll can be severe, both emotionally and financially. You can suffer damages to your home, business, or other personal property, and experience major disruptions to your income if you can't go back to work quickly.

Many Americans aren't fully prepared for an emergency. One in 3 Americans say they've done nothing to financially prepare for a natural disaster and fewer than half say they have enough savings to cover short-term expenses after a major disaster.* So creating a financial plan to prepare for disasters is a critical step that everyone should take now.

Coping with the aftermath of a natural disaster requires its own strategy. The tips below can help you get back on your feet.

Dealing with a damaged residence

In the hours and days following a natural disaster, you might find a place to live through a friend, relative, or an emergency shelter. But if your house is severely damaged or there's an ongoing threat such as a nearby wildfire, you may need to find longer-term temporary housing. Contact your local emergency management agency for help finding a place to stay.

After a disaster is declared, you may qualify for federal funding through the Federal Emergency Management Agency (FEMA) to cover hotel expenses while you look for housing, as well as the cost of a rental for up to 18 months, or until you're able to return to your home.

Tip: You may be covered for loss of the use of your home. To make sure you don't lose valuable financial benefits, ask your insurance company for exact details on how the claims process works, including documentation required and if any pre-approvals are needed.

Managing the insurance claims process

Whether you have a homeowners policy, renter's insurance, or business insurance, contact your insurance company as soon as you can after a natural disaster. Even if you don't know the full extent of the damage, you'll want to get a claim number to reference in future calls.

Take these 3 steps:

  1. Confirm that your policy will cover the damage. Floods and earthquakes often aren't covered by homeowners insurance, for instance, and require separate coverage.
  2. Ask how long you have to file a claim and what documentation your insurance company requires.
  3. Create an inventory of property that was lost or damaged and save your receipts for any expenses related to the disaster or recovery because you may need them for your claim.

Remember that insurance companies need to deal with a high volume of claims after a disaster. It can take several months or even more than a year to receive a payout.

Replacing lost income

Between emergency expenses and lost wages, natural disasters can seriously impact your cash flow. While Fidelity recommends building an emergency fund of at least 3 to 6 months' worth of expenses, you may not have that cushion—or you may find that's not enough to cover your needs.

Additional options for dealing with lost income include:

  • Unemployment assistance. If your employment is interrupted or you lose your job or business because of the disaster—and you're not eligible for regular state unemployment—you can apply for unemployment benefits through the Disaster Unemployment Assistance program.
  • SBA disaster loans. The US Small Business Administration (SBA) offers long-term, low-interest loans to help homeowners and renters recover from disasters for lost and damaged property that's not covered by insurance—and you don't have to be a small business owner to qualify for one of these loans.
  • Emergency grants. Individuals may be eligible for disaster relief funds through FEMA to help pay for food, utilities, medical bills, cleanup, and other costs not covered by insurance.
  • 401(k) hardship withdrawals. If your workplace retirement plan allows for it, you may be able to take a loan from your 401(k) to cover losses that aren't covered by insurance, savings, or other relief funds. And only if necessary, you could apply for a hardship withdrawal. Consider this as a last resort, though, because you'll owe income tax and possible penalties on your withdrawal and you'll lose out on the potential growth of that money.

Handling mortgage payments

Even if you can't stay in your house because it's too badly damaged or completely destroyed, you must still pay your mortgage. If you're having trouble keeping up with payments, talk to your mortgage servicer as soon as possible to find out if they'll offer forbearance (an option to delay loan payments), waive late fees, or provide options for reducing or stopping payments temporarily. 

Many lenders will offer forbearance for 90 days after a major storm, and they may extend the period on a case-by-case basis. Lenders are more likely to offer forbearance if you have a mortgage through Fannie Mae or Freddie Mac. You can also talk to Housing and Urban Development (HUD)-approved housing counselors, who can help you understand your options.

Replacing lost documents

Losing vital records is common in a natural disaster—and can cause problems long after you've recovered from the physical damage if you don't replace them. Make a list of your missing documents and then check the appropriate issuing agencies or offices for instructions on obtaining a replacement.

Key documents you may need to replace include:

  • US birth certificate: Contact the vital records office in your state of birth.
  • Driver's license: Contact your state's motor vehicles department.
  • Social Security card: Check the Social Security Administration website for replacement steps.
  • US Passport: Report your lost card/passport to the State Department and fill out a form for a new one.

For other important documents, such as insurance cards and financial statements, you may have online accounts where your information is stored. But if you need hard copies or physical cards, contact each company for assistance replacing your records.

Tip: Try FidSafe® a free online service, to store, organize, and share digital copies of your financial, legal, and other personal documents.

Get back on track

Natural disasters can leave individuals and communities reeling—and recovery is often a long process. Working with a financial and tax advisor, you can take steps to possibly write off your losses as you rebuild your home and life. And if you're experiencing financial strain, reach out for help. Taking advantage of grant programs and relief organizations can help you get back on track as quickly as possible.

Next steps to consider

Make an appointment to talk with a Fidelity advisor.

Plan ahead to keep your home improvements on budget.

Ask yourself 4 questions to help prepare for the unexpected.

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