| Protecting your finances after disaster
strikes |
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"If you have to go back for
more money, it's a very tough negotiation."
If you'll have to wait for the
repair work to be done because of high demand, you'll want to discuss
this with your claims adjuster. The cost of materials can easily
escalate after a disaster, thus increasing the cost of the repair
work. As an example, Welch says the price of lumber may jump because
of a surge in demand. Even higher fuel prices can increase your
repair costs.
Be sure to keep all correspondence
from the insurance company and make notes when speaking with the
adjuster -- including the adjuster's name and the date of each conversation.
Don't hesitate to go over the adjuster's head to a higher level
of official if you feel the settlement offer is too low. If the
adjuster makes a visit to your property, be sure you or a trusted
adviser is there to work with the adjuster.
If you're having a problem with
your insurance company that you are unable to resolve, you can contact
your state's
department of insurance. There is a policyholder's service section
in most Commissioner of Insurance offices.
5. Develop a financial strategy
If you've received a settlement check and you're still waiting for
the repair work to be done, make sure to isolate the check in a
separate account.
"Don't co-mingle the insurance
check with your holiday money. All you'll get is a lot of great
presents, but no money to make the repairs on your home," says
Welch.
If your insurance proceeds don't
cover your costs and you've used up your emergency reserves, there
are other options for obtaining the money to make necessary repairs.
"If you have a life insurance
policy with a cash value, you can borrow against it," suggests
Alan Goldfarb, a certified financial planner in Dallas.
You can also borrow against your
brokerage account.
"With some exceptions, the
law allows you to borrow up to 50 percent of the current fair market
value of your account on your signature. But you want to set up
your ability to borrow in advance. It's called a margin loan and
it's like a line of credit. You don't have to use it, but it's there
if you need it," says Goldfarb, who suggests speaking with
your stock broker who can advise you how to do this.
Another source of emergency funds
is your retirement account.
"A lot of 401(k)
accounts allow for borrowing for emergency use," says Goldfarb.
And when you pay it back, you'll
be paying it back to yourself.
If your house is still standing,
you can also use a home equity loan to get the needed cash for disaster
repairs.
But try to avoid using high-interest
credit cards to finance the repair work, caution the experts. It's
too costly.
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