When a disaster strikes, the financial impact can be just as overwhelming as the physical damage. Here are key steps you can take and mistakes to avoid as you begin the rebuilding process.

Bright Harbor Tip:

Managing your finances can be daunting, but you can break these steps into single tasks that you can complete in chunks, then return to continue your progress.

What To Do

• Secure funds to pay for your family’s most immediate needs

• Contact your mortgage holder as soon as possible

• Start recording all your expenses for later reimbursement

• Work through insurance claims, grants, loans and tax issues

Step 1: Secure Immediate Access to Funds

Your financial access may be limited as banks and ATMs may be closed, while insurance claims take time to process. It’s critical that you secure funds as soon as possible to cover your essentials.

What To Do Right Now:

• Contact your bank and credit card companies. Many financial institutions offer disaster relief, including waived fees, temporary credit line increases, or deferred payments.

• Request an advance from your insurance company. If you have a homeowners or renters insurance policy, ask if your policy includes ALE, or Additional Living Expenses and what the limits are since it means cash upfront to help pay for immediate needs like temporary housing, food, and clothing.

Common Mistake To Avoid:

Waiting for your full insurance payout before securing funds. Recovery takes time, and having money on hand will make your transition easier.

Step 2: Notify Your Mortgage Lender and Protect Your Home

Even if your home is damaged or destroyed, you’re still responsible for your mortgage. But most lenders offer post-disaster options to give you breathing room while you focus on rebuilding.

What To Do Right Now:

• Contact your mortgage company. Most lenders offer disaster forbearance or deferment programs, letting you temporarily pause or reduce payments without penalties.

• Request a property tax reassessment. If your home’s value has significantly decreased due to damage, you may qualify for a temporary reduction in property taxes.

• Understand your insurance payouts. If your home is a total loss, your mortgage company may control the disbursement of insurance funds. Be prepared for these funds to be released in stages as rebuilding progresses.

Common Mistake To Avoid:

Pausing payments from forbearance may lead to a balloon payment later on. Coordinate with your insurance company so they can provide funds to your mortgage lender for future payments.

Step 3: Keep Detailed Records of All Expenses

Rebuilding is a long process, and tracking how money gets spent will be critical for reimbursement, tax benefits, and long-term planning.

What To Do Right Now:

• Create a simple tracking system. A notebook, spreadsheet, phone notes, and phone photos are the easiest way to track items, so pick one that works best for you. We’ve also written a dedicated guide on how to approach this.

• We recommend that survivors open a bank account specifically for the disaster. All payouts from insurance as well as all costs related to the disaster should move through that account. It’ll make it easier when submitting claims, providing evidence to FEMA, monitoring total insurance payouts, and tracking your disaster recovery costs.

• Save your receipts. Insurance companies, FEMA, and tax filings may require proof of expenses. Log all receipts for:

  • Temporary housing and lodging

  • Essential purchases like clothing, food, and medical supplies

  • Home repairs, contractor payments, and rebuilding materials

• Log any payments received, including:

  • Insurance payouts

  • Grants

  • Loans

Common Mistake To Avoid:

Don’t assume you’ll remember your expenses later. Getting started early makes the process easier as you spread the work out over time. Without documentation, you may struggle to claim all your reimbursements or deductions.

Step 4: Work Through Your Insurance Claims Carefully

Insurance is one of your most important resources for rebuilding. The claims process can be slow, but understanding how it works will help you maximize your payout.

What To Do Right Now:

• Request an advance on your claim. This can help cover immediate needs while your full claim is being processed.

• Understand the disbursement process. If you have a mortgage, your insurance check may be issued jointly to you and your lender. This means you may need lender approval to access funds.

• Document all damage thoroughly. Take photos and videos before any repairs begin, and start a detailed inventory spreadsheet of all your lost or damaged items from your home.

Common Mistake To Avoid:

Don’t accept the first insurance settlement without reviewing it. If the amount seems low, you can negotiate or provide additional documentation to support your claims.

Step 5: Explore Rebuilding Loans and Assistance Programs

Even with insurance, you may need additional funds to rebuild your home or replace lost property. Several government and private programs can help.

What To Do Right Now:

• Apply for FEMA assistance. If you qualify, FEMA may provide grants for temporary housing and repairs.

• Consider an SBA disaster loan. The Small Business Administration (SBA) offers low-interest loans to homeowners and renters to cover repair and rebuilding costs, and we’ve written a guide specifically about this.

• Check for local relief funds. Nonprofits, community organizations, and state agencies often provide additional financial support.

Common Mistake To Avoid:

Don’t rely solely on FEMA grants. FEMA provides limited funds, and most assistance comes in the form of loans rather than free money.

Step 6: Understand Tax Implications and Benefits

Disasters often come with special tax relief measures that can reduce your financial burden.

What To Do Right Now:

• See if you qualify for a disaster-related tax deduction. To claim losses that insurance didn't cover, you may receive a casualty loss deduction, resulting in a larger refund.

• Check if any tax filing deadlines have been extended. The IRS often grants extensions for taxpayers in federally-declared disaster areas.

• Consult a tax professional before spending insurance funds. Certain payouts may have tax implications, depending on how they are used.

Common Mistake To Avoid:

Don’t forget to claim your tax benefits. Many disaster-related expenses can be deducted, but you must keep detailed records and file proper forms.

Final Takeaway: Focus on Rebuilding, Not Just Paying Off Debt

Rebuilding after a disaster is a long process, and financial decisions should be made with that goal in mind.

• Secure immediate funds to cover essential needs.

• Communicate with your mortgage lender and understand your insurance disbursements.

• Track every expense, receipt, and payment for reimbursement and tax purposes using a simple process.

• Apply for any available aid and loan programs to support rebuilding.

Avoid the temptation to settle debts early or rush into major financial decisions. Your top priority should be rebuilding your home and stabilizing your financial future.