investing

Financial Prep for Natural Disasters

Make sure you have enough insurance to cover the full cost of rebuilding your home after a fire or other catastrophe.

Question: I live near the recent wildfires in California, and fortunately my house was safe. What can I do to protect myself financially if I’m not so lucky next time? - M.S., Woodland Hills, Calif.

Answer: Most important, make sure you have enough insurance to be able to rebuild your home—many people who lost houses in wildfires in recent years were underinsured. Derek Ross, an independent insurance agent whose Oak Park, Calif., house was within 50 yards of the November wildfires, has helped several clients whose homes were lost or damaged. He recommends getting an estimate on rebuilding costs from an insurer that has visited your home or from a builder that can tell you the cost per square foot of reconstruction in your area. Let them know about any high-end materials used in the house that will need to be replaced. Ross also suggests getting extended replacement cost coverage, which adds 25% to 50% to the coverage amount if the cost of labor and materials rises after a disaster (see Trim Your Home Insurance Premium).

Having a video inventory of your household before a disaster strikes—and photos of damages afterward—will speed up the claims process. Also find out about other coverage that can help. Insurers typically cover the cost to replace damaged landscaping, with limits up to $1,000 to $5,000. Some insurers even sent out trucks to spray fire retardant on high-end homes.

And if you must evacuate during a fire, keep receipts for the cost of staying in a hotel or rental, which insurers cover as “additional living expenses,” often for up to 12 months. You might be able to claim the casualty loss deduction for any uninsured losses on your tax return if your home is in a federally declared disaster area.

Most Popular

Tax Wrinkles for Work-at-Home Employees During COVID-19
taxes

Tax Wrinkles for Work-at-Home Employees During COVID-19

Are your home office expenses deductible? How does going out of state to work for a while affect your tax picture? There are some interesting wrinkles…
November 9, 2020
Retirement: It All Starts with a Budget
personal finance

Retirement: It All Starts with a Budget

When you’re meeting with your financial planner, do you talk about your budget? If not, you should.
November 10, 2020
Will Joe Biden Raise YOUR Taxes?
taxes

Will Joe Biden Raise YOUR Taxes?

During the campaign, Joe Biden promised that he would raise taxes for some people. Will you be one of them?
November 10, 2020

Recommended

Dear Mom and Dad: Thanks
Making Your Money Last

Dear Mom and Dad: Thanks

Ideally, living at home should provide a way to improve your financial well-being and lay the groundwork for future success.
November 17, 2020
Give Your Budget Some Love
Budgeting

Give Your Budget Some Love

Think of it as a flexible tool to prioritize—and achieve—your goals.
November 17, 2020
Financial Benefits for Military Families
Personal Finance for Military Families

Financial Benefits for Military Families

For Veterans Day, we run through benefits and programs meant to offset some of the financial risks service members take on. Also, hosts David Muhlbaum…
November 10, 2020
NFL Linebacker Brandon Copeland Reveals Valuable Military Benefits
Brandon Copeland

NFL Linebacker Brandon Copeland Reveals Valuable Military Benefits

Kiplinger.com contributing editor and NFL linebacker Brandon Copeland explains several key financial benefits that military service members and their …
November 9, 2020