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How to financially prepare and recover from a natural disaster

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Nobody wants to think about, let alone prepare for, having their lives upended by a natural disaster. But the more you can do to prepare, the more quickly you might be able to recover.

“Disaster recovery is an incredibly complex process,” says Kate Bulger, senior director of business development at Money Management International. “We help people with the financial recovery part.”

MMI is a nonprofit organization that helps people struggling financially after a natural disaster, providing free resources, counseling and assistance through Project Porchlight. Bulger’s work with Project Porchlight has made her very familiar with the financial struggles people experience after natural disasters — which is why she was able to help us create this financial guide to disaster preparedness and recovery.

What to expect after a natural disaster

If your community were to experience a natural disaster, you might expect damaged property and downed power lines. But you might not expect to find yourself struggling to find childcare, covering expenses while requesting reimbursements and dealing with emotional trauma.

Here are three ways a natural disaster might affect your life.

Disrupted routines

“Part of what makes disaster so tremendously difficult to recover from is that you don’t just lose your home,” says Bulger. “Schools are out, so suddenly people have their kids all the time. People’s jobs are often impacted. Transportation is impacted. You may be required to temporarily relocate.”

All of these disruptions add up, and can make natural disasters not only more expensive but also more emotionally costly. “You lose the things within your community that you use to ballast and support your life,” says Bulger.

Hidden costs

In addition to the cost of rebuilding after disaster, you’ll need to be prepared for hidden expenses associated with the day-to-day cost of living. If you no longer have access to a kitchen, for example, you may need to purchase more prepared food. You may also find yourself paying extra for hotel rooms, rental cars or laundromats.

All of these costs add up, and not all are covered by insurance. Even with sufficient insurance coverage, you’ll likely need to pay your own expenses before filing a claim for reimbursement. “With disasters people often need to pay out-of-pocket before getting reimbursed,” says Bulger. “And those reimbursements can take a long time.”

Physical and emotional trauma

It’s always a good idea to prioritize your own mental health care — especially when you’re dealing with the physical, financial and emotional burdens associated with a natural disaster. “Disasters are incredibly traumatic experiences,” Bulger explains. “And trauma can make it even more difficult to go through the recovery process.”

Whether you’re trying to cope with relocation or worrying about how you’re going to cover the costs of rebuilding, a good therapist or counselor can give you the space to talk through your fears and process your loss.

While you may be able to access free mental health resources, you should also be prepared to include self-care as one of the hidden costs of recovery — not only for yourself, but also for the other members of your family.

How to prepare financially for a natural disaster

If you live in an area that regularly experiences floods, wildfires or earthquakes, you may already know about basic disaster preparedness methods — securing bookshelves to the wall, for example, or making sure you have a go bag packed with food, blankets and financial documents in case of an emergency evacuation.

Here are three additional ways to prepare for a natural disaster, if you want to be financially ready.

Boost your credit score

If you’re planning on using credit cards to help you recover from the costs of a natural disaster, you’ll want to start improving your credit score now. Building good credit can help you access better credit cards, and help you apply for a personal loan, if necessary.

Try to build good credit before disaster hits, so it acts as a buffer when things go wrong. If it does, consider credit counseling to get back on track. Look for a counselor with experience in disaster recovery.

“The average consumer loses about 25 points on their credit score after a disaster,” says Bulger. “When people work with financial counselors, they can gain 25 points in the two years after a disaster.”

Build your emergency fund

In addition to building your credit score, you’re also going to want to build your emergency fund. Even if you can only afford to put away $25 every month, that cash is going to add up. More importantly, it’s going to be there when you need it, whether you’re rebuilding after a natural disaster or recovering after a medical emergency.

“It’s really important for people to plan ahead,” Bulger advises — and no matter what the future may bring, having extra money in savings can help you recover more quickly.

Expand your insurance coverage

There’s one more important step you need to take to prepare for a natural disaster: Make sure you have the right insurance coverage in place.

“Making sure you’re appropriately insured is critically important,” says Bulger. “Flood insurance, for example, is not part of the standard homeowner’s insurance policy. You have to buy it separately. Depending on where you live, you may also want to consider wildfire insurance or a hurricane policy.”

Candy Harrington, a journalist and travel writer who recently experienced a natural disaster firsthand, agrees. “Make sure you have adequate insurance coverage,” says Harrington, who is in the process of rebuilding after she and her husband lost their home to California wildfires.

“Especially make sure you have debris removal, replace cost for contents and building code upgrades,” she says. “I know so many people who just went for the bare-bones minimum policy without any other endorsements, and they are having huge problems.”

How to recover financially after a disaster

Knowing what to expect after a disaster is one thing. Knowing how to recover is another. If you need financial assistance after a natural disaster, you may need to learn how to navigate a complex system of organizations and resources. And although help is available, not everybody knows when or how to ask for assistance.

“Recovery is an incredibly bureaucratic process,” Bulger explains. “If you don’t know how to navigate the recovery system, it can be very difficult.”

Here are three steps you can take to make your disaster recovery a little easier, and to get back on a solid financial footing as quickly as possible.

Get help

One of the best ways to restore financial stability after a natural disaster is to ask for help — whether you’re asking a friend if you can sleep on their couch for a few days or asking your credit card issuer if you can take advantage of a hardship program.

That’s where services like Project Porchlight come in. “People need to know that they can come to Project Porchlight after a disaster,” says Bulger. “And they need to know that it’s free.”

Access resources

Whether you work with a disaster relief counseling service like Project Porchlight or go it alone, it’s important to know how to access financial resources after a natural disaster. You may want to apply for FEMA assistance, for example. Check state and local resources to see what else is available.

Be prepared for this process to take time. “You’ll need to fill out a lot of forms,” says Bulger. “And if you don’t know which forms to fill out, you could lose out on aid money or insurance.”

Use credit wisely

Even if you get all of your forms filled out as quickly as possible, there may be a gap between when you request financial assistance and when you receive it. Many people fill that gap with credit cards. “If you use credit right, it can be an incredibly useful tool,” says Bulger. “You may need to take on a little debt now, but you can make a plan to make progress on your debt later.”

If you use your credit cards to cover expenses after a natural disaster, make sure you keep up with your payments. Even making the minimum payment on time can help you maintain a positive credit history.

As soon as possible, contact your credit card issuer. “After disasters, let your credit card companies know,” says Bulger. “Every company has some kind of compassionate assistance option, and as soon as someone tells them they’ve been in a natural disaster, they’ll offer whatever they can to help out.”

Best credit cards to have for natural disasters

When you’re recovering from the financial and emotional effects of a natural disaster, having the right credit card in place can help you save on food, supplies, home repairs and unexpected travel. Here are three different types of credit cards to consider, before disaster strikes.

Cards that reward post-disaster purchases

Whether you’re rebuilding your home after a wildfire or restocking your refrigerator after a three-day power outage, it’s a good idea to have at least one credit card that rewards post-disaster purchases.

The Blue Cash Preferred® from American Express, for example, offers 6 percent cash back on up to $6,000 in grocery purchases each year, and 3 percent on gas and transit.

If you live in an area with the potential for home-damaging storms, having a credit card that rewards home improvement could help you save money, even if your insurance company reimburses your purchases later on. Some cards offer as much as 5 percent cash back at retailers like Lowe’s or Ikea.

The Bank of America® Customized Cash Rewards credit card earns 3 percent cash back in one eligible category of your choice, including home improvement, gas stations, online shopping, dining, travel and drugstores. You’ll also earn 2 percent cash back at grocery stores and wholesale clubs (up to $2,500 per quarter), then 1 percent back on all other purchases.

Cards that offer travel protections

While we usually turn to travel credit cards for vacations, the travel insurance, rental car insurance and other protections those cards offer can come in handy in emergencies too. Many people don’t think about the importance of trip cancellation coverage or the possibility of an emergency evacuation.

For a $95 annual fee, for example, the Chase Sapphire Preferred® Card offers up to $10,000 per person in trip cancellation and interruption insurance, and excellent rental car insurance — all of which can come in handy for unexpected travel.

Make sure you read any insurance documentation carefully, so you know exactly which circumstances are covered. And consider applying for additional travel insurance if your credit card doesn’t provide the coverage you need.

0% intro APR cards

If you’re paying post-disaster expenses out of pocket, choosing a 0 percent APR card can save you a lot of money on interest charges. Many of today’s best balance transfer cards offer more than a year of 0 percent intro APR on purchases — The Wells Fargo Reflect® Card, for example, offers up to 21 months — providing time to begin rebuilding, request reimbursement from your insurance company and pay off your credit card balance interest-free.

The bottom line

Natural disasters can be devastating in so many ways, including financially, which is why knowing what to do before disaster strikes is so important. If you find yourself in a bind after a disaster, services like Project Porchlight can provide counseling to help you get back on your feet.

If you use credit cards to cover the cost of natural disasters, make sure you let your credit card issuer know. And consider taking advantage of credit card hardship programs that can help you restore financial stability without damaging your credit score.

Written by
Nicole Dieker
Personal Finance Contributor
Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor.
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