Post-Disaster Financial Planning: How to Protect Your Assets

A piggy bank is engulfed in flames but not distressed.

(Image credit: Getty Images)

published 30 January 2025

When disaster strikes, it doesn’t discriminate. California wildfires have become an annual terror, and last year, Asheville, N.C., was ravaged by the magnitude of the floods that upended lives and left many residents homeless. The truth is undeniable: Fires, floods, hurricanes and earthquakes are now billion-dollar events.

The most recent wildfires in Los Angeles, for instance, have killed at least 27 people, destroyed more than 12,000 structures and forced 200,000 residents to flee their homes. According to some estimates, the financial impact could exceed $250 billion.

While rebuilding lives and homes is daunting, proactive financial planning and knowing how to navigate the aftermath of a disaster can mitigate long-term damage. This isn’t your typical financial advice — it’s more akin to financial triage. Los Angeles-based financial adviser Mitch Freedman, who can be found on Wealthramp, knows this firsthand — not only from years of advising clients but from surviving disasters himself.

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“What I learned is that the emotional and financial strain is enormous, but having a plan makes all the difference,” Freedman shared.

Here are seven things to consider for post-disaster financial planning:

1. Act fast: Submit your insurance claim and hire your own independent adjuster

The first and most critical step after a disaster is filing an insurance claim. Getting your claim submitted as soon as possible is essential because it puts you in line to work with your insurance company. Waiting even a few days can delay access to much-needed funds. Even if you don’t have all the details in the correct order, Freedman urges people to secure your place in the line.

Post-disaster, working with an unbiased private insurance adjuster can be a game-changer. These professionals advocate for you, not the insurance company, and help ensure you receive the maximum funds for temporary housing, daily living expenses and repairs.

Freedman learned this lesson after a fire damaged his Malibu home. “I thought I could handle it on my own, but my kids insisted I hire a private adjuster. They got me so much more than I could have on my own,” he said.

While total losses often result in straightforward claims that pay out the full policy limit, partial losses are far more complex. An adjuster’s expertise in valuation and negotiating with insurers can make the difference between being fully compensated and being shortchanged. Freedman explained that over the years, coverages have declined, deductibles have increased, and policy definitions have become much more precise. “There are certain things that have become excluded, which make it a lot more difficult,” he said.

For instance, if you have a house insured for $500,000 and it includes a guaranteed replacement cost with a cap of 50% above the insured value, you might be able to rebuild the house for up to $750,000. However, policies with such generous terms are increasingly rare. Similarly, if you have $100,000 worth of contents coverage and everything is destroyed — including a fireproof safe that melted — you would receive the full amount only with proper documentation and filing.

While most — but not all — adjusters aim to help, it’s essential to do your due diligence to ensure you’re working with a reputable professional. To vet an independent claims adjuster, ask for references and verify their track record with past clients. Research their certifications and memberships in professional organizations like the National Association of Public Insurance Adjusters (NAPIA), which maintains ethical standards for its members. It’s important to avoid adjusters who pressure you into signing contracts immediately or make overly optimistic promises about payouts.

As Freedman bluntly put it: “It's a dirty business, and a lot of them are slimy.”

2. Tap into post-disaster financial resources

Once the immediate danger has passed, rebuilding requires creative financial solutions. Freedman highlights several options that can help homeowners recover. Your home’s equity can serve as a vital resource for repairs and rebuilding, though it should be tapped cautiously and only after consulting with a financial adviser.

The Small Business Administration (SBA) offers low-interest disaster loans for homeowners, which Freedman described as a “fabulous help” after his home was damaged by an earthquake. He also recommends exploring potential tax deductions for disaster-related losses.

Eligible tax-deductible losses may include structural repairs, the replacement of personal property and additional living expenses not covered by insurance. For instance, if your insurance payout falls short of covering the full cost of rebuilding or replacing lost items, the difference may be deductible. It’s critical to work with a tax professional who can navigate these rules and ensure you maximize your benefits.

If cash reserves run low, other options include taking a financial hardship withdrawal from retirement accounts, such as a 401(k). While penalties are typically waived for disaster victims, taxes may still apply. Alternatively, you could consider a 401(k) loan, which allows you to borrow against your savings and repay yourself over time.

A fee-only fiduciary financial adviser can be invaluable in this process, helping you evaluate the best ways to access cash and minimize financial stress. They can also review your situation to identify tax-deductible losses, ensuring you take full advantage of available deductions. Additionally, an adviser can provide guidance on whether it makes sense to rebuild in the same location or relocate to a less-disaster-prone area.

3. Think differently about your cash reserves

Disaster recovery takes time, and insurance payouts often come with delays. For this reason, Freedman recommends going beyond the standard three to six months’ emergency savings. He advises clients to aim for one year of living expenses in cash or cash-equivalent investments, such as money market funds or laddered certificates of deposit. This ensures you can cover costs like temporary housing, repairs and daily expenses without dipping into long-term investments.

For those unable to save a full year of expenses, having at least three months’ worth of expenses in cash is essential. As Freedman noted, “Credit cards are often useless if power is out. Cash is king in the immediate aftermath of a disaster.”

4. Treat your insurance policies as living documents

Freedman stresses the importance of treating your insurance policies as living, breathing documents. Policies change, and insurers may exclude certain damages or increase deductibles without much notice. He recommends reviewing your coverage annually and consulting with a knowledgeable insurance broker to identify gaps or unnecessary overlaps.

For valuables like jewelry, artwork and collectibles, it is critical to schedule appraisals every two years to ensure they are adequately covered. Using the same appraiser for updates can maintain consistency and save costs over time. Freedman explained, “One of my clients saw a $20,000 artwork appreciate to over $1 million. Without regular appraisals, the insurance wouldn’t have covered its full value.”

Additionally, documenting the contents of your home through a detailed video inventory can simplify the claims process. Walk through your home with a camera, narrating details about each item, including its value and purchase date if possible. Store this video in a secure location, such as an encrypted cloud service, so it can be accessed even if physical copies are destroyed.

5. Put together a disaster go-kit

Having a well-prepared disaster go-kit can also be a financial life preserver. Freedman learned this lesson the hard way during an earthquake when he scrambled in the dark to gather important documents. Today, he keeps essential items ready to go at a moment’s notice.

A comprehensive go-kit should include enough cash for immediate needs, copies of critical documents such as insurance policies and bank statements and secure access to passwords for financial accounts. Freedman emphasized the importance of digitizing documents and storing them in an encrypted cloud service.

He also recommends including prescriptions, phone chargers and a detailed list of emergency contacts. For pet owners, planning for their safety and supplies, such as food and medications, is crucial. “Preparation can save you precious time and reduce stress during an evacuation,” Freedman said.

6. Assess the impact on your investment portfolio

Natural disasters shake up not only your physical world but also your financial plans. It’s important to assess how the disaster has impacted your overall financial situation and determine whether your long-term needs have shifted.

Freedman advises taking a measured approach: “Recovering from a disaster is a temporary situation. Unless there’s a compelling reason, avoid making hasty decisions about your investments.”

Start by evaluating whether your current portfolio still aligns with your immediate and long-term financial needs. For instance, if the disaster has created unexpected expenses or depleted your cash reserves, it may be prudent to adjust allocations to increase liquidity. Working with a financial adviser can help you determine the necessity to rebalance your portfolio.

7. Resilience requires planning

Freedman’s personal experiences underscore the importance of preparation. “It’s not just about finances — it’s about peace of mind,” he said.

Being financially and emotionally ready for a disaster can reduce the toll on your family and your future.

It’s something everyone should think about. Few people could have imagined the devastation Hurricane Helene would unleash as far inland as Asheville. Consider that from 2020 to 2024, the U.S. faced numerous weather and climate events, each causing damages exceeding $1 billion. The total cost of these disasters over the five-year period amounted to $746.7 billion, averaging $149.3 billion annually.

As Freedman reflected, “Disasters are unpredictable, but your financial recovery doesn’t have to be. By planning ahead, you can protect your assets, reduce stress and rebuild your life with confidence.”

His advice — rooted in both professional expertise and lived experience — offers a road map for navigating life’s most challenging moments. While no one can predict the next wildfire, earthquake or hurricane, proactive planning can help ensure you’re ready for whatever comes next.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

With more than 25 years in investor advocacy, Pam Krueger is the founder and CEO of Wealthramp, an SEC-registered adviser matching platform that connects consumers with rigorously vetted and qualified fee-only financial advisers. She is also the creator and co-host of the award-winning MoneyTrack investor-education TV series, seen nationally on PBS, and Friends Talk Money podcast.