Financial Effects of Natural Catastrophes

By Staff Reporter - 19 February 2020

Features

Natural disasters are major adverse events resulting from natural processes. They include floods, storms, earthquakes, hurricanes, and tornadoes. The occurrence of natural disasters affects everyone on an individual and community level. They are inevitable and have always been a fact of life and can happen anytime and anywhere. Individuals and families who survive natural disasters are likely to become victims of both physical and psychological injuries, as well as property damage. Although we can’t stop natural disasters from happening, there are several ways to reduce the risks and hazards they entail. This will help us gain control over our lives after the event of natural catastrophes, like floods, storms, and hurricanes. Below are some of the major financial impacts of natural disasters.

Displacement

Natural disasters such as tornadoes, hurricanes or even floods have destroyed a multitude of communities and the homes that people live in. When this happens, the victims often find themselves struggling to survive for months, and maybe years. More often, you may have to stay in a hotel or a shelter for an undetermined length of time. During this time of displacement, it is crucial to keep in mind that the costs of living in a hotel can be very expensive. Apart from that, you have to regularly allocate finances to travel to your property for scheduled inspections and repair. You might also have to temporarily relocate while your home is being repaired. Hence, it is essential for you to have a dedicated emergency fund for food, gas, shelter, and other emergency supplies. 

Property Repair

As mentioned earlier, natural catastrophes can gravely destroy properties. In the USA alone, an average hurricane can incur $21.6 billion damage costs. Additionally, wildfires have burned 18,137 residences in 2018. Regardless of the type of natural disaster, it is guaranteed that you have to prepare for unexpected expenses. If you have been displaced, you will have to allocate funds to secure your property from looters or vandals. You will also have to pay for temporary fixes and repairs. Having emergency cash is crucial during these times. It is also worth knowing your insurance's inclusions. Keeping dedicated accidental building damage insurance is also recommended, especially if something happens to you and your family. You have to keep in mind that your standard home insurance does not cover accidental damage. It is something worth checking, since the damage caused by natural disasters makes your property more vulnerable. For example, the accidental building damage insurance can help you if you or your family accidentally breaks your window while cleaning up after a hurricane or flood. 

Mortgage and Bills

 

While you deal with major home repairs and getting back-up after a natural disaster, it can be difficult to manage with bills and other expenses. During these times, you might also temporarily lose your job and have difficulty sending in payments. This can lead to your account getting overdrawn, a growing credit card debt, and even foreclosure if you miss out on credit card payments. To avoid this from happening, it is recommended to set up auto-payment options with your service providers. Review your present income and savings to assess if they will be enough to cover not only your expenses but also your bills and debts. If you will temporarily have difficulties in going back to work or securing a stable source of income after a natural disaster, make sure to contact your mortgage service provider to explain your situation. This should also be done to your bank or lenders, as well as your credit company. You can also check with local organizations if you can qualify for disaster assistance programs. If the financial company you are dealing with has special disaster relief policies, make sure to know and understand how these policies work. 

Collection

After a natural disaster, some people might be surprised to know that their account has already been forwarded to a collection agency. If this happens, it will majorly affect not only your finances but also your credit report and scores. This case usually occurs if a creditor has difficulty in reaching you, especially if you have temporarily relocated or if your home services and utilities are no longer working. To avoid this from happening, make sure to get in touch with your bank or service company to update your contact information and set up a forwarding address. 

Natural disasters can severely impact your way of living and finances. However, the risks and negative impacts of natural disasters can be mitigated through proper planning and preparation. Natural disasters are out of your control, but luckily, their effects can be significantly reduced with the right strategies.

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