Housing Aid For Disasters
A disaster is a worst-case scenario, and it's easy to think it can't happen to you. Disasters do happen, though, and homes are often affected. Here's what you can do to prepare or respond.
Disasters seem to be in the news on a daily basis. From earthquakes to wildfires to hurricanes and floods, we seem inundated by catastrophes that can demolish homes and businesses in minutes and leave lives in chaos. What can you do to prepare for possible catastrophic events, and what help is available if you're a victim?
There are four basic categories of relief aid: private insurance, direct government reconstruction aid, loans, and mortgage relief. Let's look at each in turn.
News coverage often includes reports of how many billions of dollars the government has allocated for reconstruction. Many people hear those numbers and assume that the government will have their backs if catastrophe strikes. That assumption is simply wrong. Government assistance is limited and is not intended to provide full reconstruction or substitute for insurance. The current maximum assistance that FEMA can provide per household is $33,300.
According to the Federal Reserve Bank of St Louis, the average sale price of a home in the US was $377,900 in the 2nd quarter of 2017.
Those numbers are pretty far apart, and if a hurricane or earthquake flattens your $300,000 home, $33,300 is not going to rebuild it.
The bottom line: if you live in a high-risk area, you need insurance.
Let's repeat that because it's vitally important: if you live in a high-risk area, you need insurance. Federal and state relief programs exist, but they are not intended to substitute for private insurance, and they will probably cover only a fraction of your losses in a serious event.
If you do not live in a high-risk area, you have to consider your options. Insurance will be expensive, though premiums will be lower in low-risk areas. Still, you have to understand that government assistance is limited and hedge your bets accordingly.
It's important to note that many homeowner's insurance policies do not cover losses from catastrophic events or provide limited coverage for them. You may need to purchase a supplemental policy or add "riders" to your existing policy based on the main threats in your area. Examine your policy carefully, discuss it with your agent, know what it covers and what it doesn't, and add coverage where it's needed. Yes, it will cost, but losing everything is a pretty grim prospect. Many earthquake and hurricane policies have high deductibles that may require you to pay a substantial percentage of the cost out of pocket. Again, know your policy and set aside enough savings to cover that deductible.
The Federal Emergency Management Authority (FEMA) provides direct relief to individuals and households through the Individuals and Households Program (IHP). FEMA specifically states that "IHP is not a substitute for insurance and cannot compensate for all losses caused by a disaster; it is intended to meet the survivor's basic needs and supplement disaster recovery efforts."
FEMA only provides aid if the President has declared an event a disaster.
You will be eligible for IHP if:
You are a US citizen, non-citizen national, or qualified alien
FEMA can verify your identity
Your insurance cannot meet your needs
Your expenses and needs are directly caused by a declared disaster
If you meet these qualifications, FEMA can assist you with renting temporary housing while your home is repaired, provide reimbursement for hotel/or motel expenses, assist with actual home repairs, or help you replace your home. As stated above, the maximum total assistance per household is $33,300.
FEMA may provide direct housing assistance if no rental housing is available and the state government requests this assistance. Direct housing assistance is not included in the $33,300 assistance cap.
FEMA can also provide funeral assistance, medical and dental assistance, and child care assistance to victims. Households who do not qualify for an SBA loan may be eligible for additional aid in the following categories:
Personal Property Assistance
can help to repair or replace essential household items, professional equipment, or disability-related needs.
can help repair or replace a damaged vehicle or cover other transportation costs.
Moving and Storage Assistance
can help move and store items to prevent further damage during repairs.
All FEMA assistance is limited to 18 months after the declaration unless the government provides an extension.
FEMA assistance can provide important help, but remember that it is limited. It is only available in a declared disaster, and there's a strict cap on available aid. It is not a substitute for insurance.
SBA Disaster Loans
Small Business Administration (SBA) disaster loans are the US Government's primary assistance program for reconstruction. You don't have to have a business to qualify: homeowners and renters are eligible. There are three basic types of SBA disaster loan:
Home Disaster Loans
are for repair or replacement of real estate or personal property, including automobiles.
Business Physical Disaster Loans
assist with repair or replacement of physical property owned by a business of any size. Non-profit, educational and religious organizations are also eligible.
Economic Injury Disaster Loans
provide working capital to help businesses meet financial obligations that may be put at risk due to a catastrophic event. These loans are available only to entities that cannot provide for their own recovery.
Home loans are limited to $200,000 for repairing or replacing real estate and $40,000 to repair or replace personal property, and cannot exceed your uninsured damage from the event. The maximum loan term is 30 years, and interest rates depend on your ability to get credit elsewhere. If the SBA decides that you cannot get credit elsewhere, they will charge a maximum rate of 4%. If you can get credit elsewhere, your maximum rate will be 8%. Rates are per year and fixed for the loan term. You will need an acceptable credit history, the ability to pay, and you may be required to pledge collateral.