Finances Before and After a Natural Disaster

The general rule to have 3-6 months’ worth of expenses saved in your emergency fund takes on a whole new meaning when someone goes through a natural disaster.  A hurricane can wreak havoc on family finances, everything from going into collections due to missed communications with creditors and utility companies, to lowered credit scores, foreclosure, credit card debt, bankruptcy, and job loss.  One study from the Urban Institute showed that even four years after the disaster, finances are still suffering.  Those in poor financial shape before the disaster go through more financial distress in the aftermath of a disaster than those who were in better financial standing.  A survey report from victims of Hurricane Michael in 2018 revealed that 40% of respondents lost income, whether from their hours getting cut, they lost their job, or they were furloughed due to their place of employment being destroyed or temporarily closed.

And of course, your financial wellbeing just before the storm arrives plays a big part in how people prepare.  Some don’t evacuate because they can’t afford a hotel or the time to take off work to leave.

Remember that the deductible for hurricane damage, called the hurricane deductible, is separate from the regular deductible on your homeowner’s insurance.  Some impacted by Hurricane Michael were surprised by this.  Check your insurance policy so you are not caught off guard next year.  The deductible can range from 2%-5% of the home’s insured value, or higher in some areas.  If you are renting, make sure you have renters insurance, as this will typically cover any personal items damaged from a hurricane.

If you don’t think your current finances could weather a storm, it’s time now to get your finances in order by next hurricane season:

How much does it cost to run your household?  Then multiply that by 3 and 6.  That is the range you should have in your emergency savings account.

How much is your hurricane deductible?  Does your emergency fund cover this, or would you consider saving for this separately so you’re not draining your entire savings on the hurricane deductible?  FEMA doesn’t reimburse for insurance deductibles.

Building up an emergency fund can take a year or more.  If you need help putting together a budget with a strong emergency fund, talk to your local county Extension office to see if they offer financial workshops.





Shari Bresin, Family and Consumer Sciences Agent for Pasco County Extension
Posted: October 10, 2022

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