Financial recovery and risk management
Brenda Procter, M.S., State Specialist & Instructor, Personal Financial Planning, University of Missouri Extension
Someone attempting to restore their life and home after a storm will face difficult decisions at a time when stress can cloud one's thought process. In many cases, the decisions will involve large investments. Naturally, people want to recover as much as possible through their homeowner’s insurance policy. Where insurance falls short of needs, other types of assistance may be available, especially where the President has declared a disaster area. Claims that aren't covered by insurance or other reimbursements are tax-deductible if they exceed 10 percent of adjusted gross income.
Another part of your financial recovery involves making good
business decisions when contracting for repairs. Here is
information and tips to help you work through the recovery
Documenting Losses and Claims
Whether you’re filing for insurance, seeking assistance or claiming
a casualty tax deduction, you will need proof of your losses. Before
you start cleanup, take pictures. If you can’t take pictures, describe
the situation accurately, listing the specific items that have been
lost or damaged. Keep damaged materials for proof of loss until
your insurance adjuster authorizes their disposal. It’s okay to
remove the damaged articles from their original location to prevent
further damage to the building, but do not throw them away without
insurance company approval.
Remember to also document the losses in your landscape and garden.
In addition, document the amount of debris you will have to remove, and
whether it came from your property or elsewhere. Some homeowner's
insurance policies cover debris removal.
- Save all receipts for your temporary lodging and food if
your home is not fit to live in. Some policies pay the difference
between normal living expenses and the cost of living elsewhere.
- Save receipts for temporary repairs you made to protect
your property from further damage.
- Save receipts for any materials you bought and for other
items you needed to protect your building or its contents from
further damage. You may be able to claim these on your homeowner's
- Keep a copy of all letters and receipts that you send to
insurance companies or relief agencies.
- Keep a record of all phone calls you made to get reimbursements
Filing for Insurance
These tips are offered to guide you in filing insurance claims
for damage to your home and loss of personal property:
- Call your insurance adjuster immediately, and provide a
phone number where you can be reached. If phone service is not
available, work through disaster assistance workers from the
Federal Emergency Management Agency (FEMA) or the Red Cross
for assistance in reaching your insurance adjuster.
- If possible, wait for an adjuster to survey damage. Meanwhile,
carefully document losses and begin cleanup and salvage to prevent
further damage to your home. Keep damaged materials in an isolated
spot as far from the building as possible.
- Follow up on your insurance call with a letter detailing
your problems. Keep a copy of the letter.
- Leave phone numbers where you can be reached when the adjuster
- Ask the adjuster to assess damages. Sign the proof of loss
statement. Report additional damage as it is found.
- Provide any other information the adjuster requests.
Be sure to file your insurance claim within the policy's imposed
time limits. For homeowner’s policies, it varies. Review the settlement
steps outlined in your policy. If you’re dissatisfied with the proposed
settlement offer, explain your position in writing.
The Missouri Department of Insurance (MDI) can help if you feel
you’re being unfairly treated by your insurer. For example, if the
company didn't contact you within 48 hours after the claim was reported,
or if the company refuses coverage that is specified in your policy.
For more information about MDI, call 1-800-726-7390 or review
the "Consumers" section on their website at
Many people are surprised about the extent of protection a homeowner’s
insurance policy offers. Although your homeowner’s policy does not
cover damage caused by rising floodwaters, it does offer some protection
from loss caused by wind, rain, hail, snow, lightning and freezing
temperatures. If you have experienced a loss or damage to property,
review your policy’s provisions and contact your insurance agent
to file a claim and/or to update your policy to include coverage
you need for the future.
Be sure your coverage amount is always at least 80 percent of the current
replacement cost of your home. Otherwise, you will not be paid the
full cost of replacing a partial loss. Also, many homeowner’s policies
pay for losses to your contents (furniture, appliances, clothes,
etc.) on an actual cash value basis (replacement cost minus depreciation
for age or wear and tear). A better option is to buy replacement
cost coverage that pays the full cost to replace your personal property
at today’s prices. Although the premium costs are a little higher,
the extra protection is usually worth it.
For more information on homeowner’s insurance, see
These items are usually covered but may vary according to the
policy's provisions and up to the dollar amounts that you purchased:
- Your house, including rental units that are part of the
building, and any attachments to the building such as a garage.
- Any structures on your grounds that are not attached to
your house such as a garage, tool shed, pool cabana, gazebo
- Cemetery plots or burial vaults that you own.
- Vacant land that you own or rent, with the exception of
- Personal possessions that you or members of your household
own or use anywhere in the world. This includes the contents
of your house and any structures on your grounds. It also covers
any possessions that guests bring to your house, but it does
not include the possessions of any tenants you may have living
in your home.
- Any items that friends have lent to you that you're keeping
on your property.
- Your living expenses, if your house is not fit to live in
because of damage.
- Rental payments, if you normally rent part of your house
but no longer can because of damage.
Many policyholders may be unaware of the extent of the protection
offered by their homeowner’s insurance. If you have experienced
a loss or damage to property, review your policy’s provisions and
contact your insurance agent to file a claim and/or to update your
policy to include the coverage needed for the future.
A standard homeowner’s policy does not cover your cars, most
recreational vehicles, watercraft, animals, birds or fish. While
homeowner’s insurance does not cover losses from rising water, it
usually does cover water damage from such things as leaking roofs,
broken windows and broken pipes. Most policies do not cover sewer
backup unless you purchase a sewer backup endorsement.
You should know, if you are in a designated special flood hazard
area and your structure is substantially damaged by any force (wind,
water, fire), you may be required by the local permit office to
meet the flood damage prevention requirements for new construction;
for residential structures this means elevation. A structure is
substantially damaged when the cost of restoring the structure to
its pre-damage condition is 50 percent or more of its pre-damage market
value. Owners of structures in special flood hazard areas can partially
insure themselves for the added expense of elevating a wind or fire-damaged
structure before repairs by purchasing a “Code Compliance” endorsement
on their homeowner’s policy.
Losses caused by rising floodwater are not covered under most
homeowner’s insurance policies. If you have purchased coverage through
the National Flood Insurance Program at least 30 days before being
affected by a flood, you will be protected against property damage
caused by such flooding. You may also be partially reimbursed for
steps you take to prevent flood damage, even if the flood never
reaches your building.
Flood insurance policies written or renewed on or after June
1, 1997, include an endorsement called Increased Cost of Compliance
(ICC). This coverage will pay up to $15,000 for elevating or relocating
an insured dwelling so that it is above the flood protection elevation
required for new construction. For nonresidential structures, flood-proofing
by other methods may also be covered. The coverage may be used toward
the cost of demolishing the flood-prone structure and building a
new structure at the required elevation.
ICC coverage is available only for structures that have been
substantially damaged by a current flood event for which a damage
claim is being filed. In communities with cumulative substantial
damage ordinances, the eligibility requirements for this coverage
are less stringent.
The flood insurance adjuster may submit a damage assessment form
to the flood insurance program indicating that substantial damage
is suspected; however, final responsibility for determining whether
a structure has been substantially damaged rests with the community.
In most Missouri communities, the determination will be made by
or through the floodplain administrator, who is usually the building
or permit official.
Credit and Other Sources of Relief
Victims of natural hazards whose losses exceed their insurance
coverages may obtain loans or other financial assistance.
The Red Cross helps with immediate building repairs and living
expenses when no other immediate assistance is available.
Merchants and dealers may extend credit for feed, equipment and
rehabilitation of buildings and land.
The Small Business Administration (SBA) offers medium and long-term
loans for rehabilitation of non-farm homes and small businesses
if overall damage in the community meets certain criteria. Borrowers
may obtain 20 percent over the damage repair loan amount for mitigation
(to protect the property from future damage by natural hazards).
Commercial and federal land banks offer loans with moderately
low interest rates for home repairs, improvements, land equipment
Insurance companies offer long-term loans at relatively high
interest rates for home repair, improvements, land, equipment and
Uninsured losses, and the uninsured portion of losses, should
be reported as an additional itemized deduction on federal income
tax form Schedule A under casualty losses. To be deductible, losses
must exceed 10 percent of adjusted gross income. See
Federal Disaster Assistance
If an event is declared as a major disaster by the president,
numerous additional sources of federal assistance will become available.
The Federal Emergency Management Agency will set up a disaster registration
hotline and will usually work with the State Emergency Management
Agency to establish local disaster recovery centers. The hotline
and recovery centers will be sources of access to the various federal
In addition to the SBA loans already mentioned, these types of
assistance are usually available:
- Individual and family grants, for those who do not qualify
for a loan
- Temporary housing assistance
- Unemployment assistance
- Assistance with recovery planning; mitigation advice
- Legal services to low-income families and individuals
- Crisis counseling for disaster-related mental health problems
- Special income tax advice and treatment
Housing rehabilitation assistance for low and moderate-income
households may also be available in some communities through the
U.S. Department of Housing and Urban Development programs administered
by local and state agencies.
Recipients of federal assistance for flood damage will be required
to purchase and maintain flood insurance on their property. Owners
of that property may not receive federal assistance in future floods
unless the property is protected by flood insurance during those
Contracting for Repairs and Rebuilding
Selecting a Contractor:
- As you attempt to restore your life and home after a storm, there
may be only a few local companies and individuals to perform the
necessary services. It is often advisable to do temporary repairs
and wait for local contractors who will be there to guarantee their
work long after the storm is over. If it is necessary to complete
the repairs, however, it is important to receive good quality work,
or major deterioration may appear later.
- Outside contractors and companies will enter the area to offer
their services. Some are honest and will do an adequate job, but
be careful in working with outside contractors.
- If possible, check with the Better Business Bureau, either in
Missouri or in the state and city where the company or person is
located. It also is advisable to check with others for whom they
have worked in Missouri. Determine if they have performed in a timely
and adequate manner.
- Ask for proof of insurance. The contractor must have disability
and workers’ compensation insurance, or you may be liable for accidents
occurring on your property.
- Do not pay in advance. Do not let the contractor begin work until
you have a signed contract. When the job is complete to your satisfaction,
pay by check or credit card, not cash.
- Before making final payment, ask for proof from the contractor
that all suppliers have been paid. Otherwise, unpaid suppliers can
legally put a lien on your property for settlement of bills if the
property is sold.
- If you cannot find a contractor willing to accept these basic
terms, strengthen the patches and wait patiently until you can be
sure of a good job. Even under critical emergency conditions, complete,
high quality repairs must be done, or damage and deterioration will
- The offer and acceptance (agreement) to do specific things in
a specific manner. State clearly, simply and completely all that
is to be done. If beginning and finishing dates are involved, state
them in the body of the contract. A good item to include in a contract
for home rebuilding is that materials and procedures used will be
those provided for in minimum standards of the current building
- Guarantees. Include what is guaranteed and for how long.
Also include who is responsible for the guarantee (contractor, dealer
- Permits. State who is responsible for obtaining and paying
for any required building permits.
- Parties. Parties involved must be at least 18 years of
age and mentally competent (not insane, retarded or suffering mental
problems of aging). All parties must sign the contract.
- For a consideration. Something of value changes hands,
usually money. The amount to be paid and schedule of payments should
be included in the contract. That schedule should be based on progress
toward completion, not on the passage of time. Exercise your right
to inspect all work or to hire someone to inspect the work for you.
- Change Orders. The contract should specify procedures
to be used to change the original work order. Keep a copy of the
Withhold full payment until:
- The building contractor or person hired has paid for all
building supplies used. Require receipts for all paid bills
for all materials used.
- Everything has been completed on the job to the full satisfaction
of the contract and to the satisfaction of you or your inspector.
- The contractor has provided you with releases of lien from
himself/herself, from suppliers and from labor subcontractors.
- Is the contractor offering you a special deal? Using your home
as a model for his work? Shy away.
- Is the offer too good to be true? Be sure the quality is there
before you agree to buy.
- Does the contractor want cash only? Find another contractor.
- Did the contractor solicit your business, rather than your calling
him? Were you pressured to sign a contract? Federal law gives you
3 days to cancel such a contract after you sign it. Send your notice
of cancellation by registered mail.
- Do you think you’ve been had? Have you tried to resolve
your problem with the contractor, but been unsuccessful?
Don’t be embarrassed to file complaints or obtain
information by calling the Attorney General’s Consumer
Hotline at 1-800-392-8222 (outside Missouri, call
573-751-3321) or file online at
For more information, contact your local University Extension
Adapted from Financial Recovery and Risk Management,
Louisiana State University
Reviewed by Calvin Call, Executive Director of the Missouri Insurance Coalition
Last update: Friday, July 15, 2011