Homeownership: Rebuilding after a disaster
“Natural disasters come and go in the news, but the actual aftermath lingers long after the TV cameras go away,” said Geoff Williams in USNews.com. Hundreds of thousands of Americans on the Gulf Coast are now facing a long, hard slog to recover financially from hurricanes Harvey and Irma. And in the western U.S., devastating wildfires this summer also destroyed or damaged hundreds of homes. If you’ve been affected by a natural disaster, “probably the first thing you’ll do after the dust settles is contact your insurance company.” It may take some time for an adjuster to arrive if you live in a hard-hit area, but you can help your cause by documenting the destruction carefully. Lining up contractors in advance is a good idea, but “don’t pay for work before you have approval from your insurance company.”
“Tragedy’s hand might be unpredictable, but the road to recovery is forged in the language of your homeowner insurance policy,” said Ronda Kaysen in The New York Times. Unfortunately, navigating an insurance company’s bureaucracy can be hard enough at the best of times. A 2014 survey by Consumer Reports found that of the 6 percent of homeowners who filed claims for $30,000 or more, 41 percent reported complaints, including “disagreements over damages or coverage, delays, or slow payouts.” To avoid disputes, keep detailed notes of all your conversations, as well as copies of all other correspondence and receipts. Independent insurance experts known as public adjusters can help you navigate the process, “albeit for a hefty fee.” In the state of New York, for instance, they can charge as much as 12.5 percent of your settlement. “But some homeowners, particularly those with limited time, view a public adjuster as an advocate well worth the fee.”
In the aftermath of Harvey and Irma, the Internal Revenue Service is making it easier for people living in disaster areas to pull cash out of their 401(k) plans in the form of a loan or hardship withdrawal, said Russ Wiles in the Phoenix Arizona Republic. “However, the agency isn’t easing the associated tax bite, including penalties, that can arise.” It’s almost always better to take out a loan against your plan rather than make an outright withdrawal. With a hardship withdrawal, you’ll still be on the hook for the 10 percent early withdrawal tax penalty if you’re younger than 59½ years old. “Tapping your accounts now puts you at risk of being in worse financial shape in the future,” said Tobie Stanger in ConsumerReports.org. Exhaust your other options first, including other investment accounts. One possibility: Homeowners in federal disaster zones may borrow up to $200,000 in longterm, low-interest loans to repair or rebuild their home, plus $40,000 to replace lost personal property.