Personal Finance

If storm damage prevents you from working, insurance may cover your wages

Key Points
  • If a natural disaster prevents you from working, you may be able to recover lost wages.
  • It's important to file your claim quickly.

If you are unable to work because of natural disasters like Hurricanes Harvey and Irma, you may be able to recover lost wages.

To be eligible, your company must have insurance to cover that situation or you must qualify for federal assistance in a presidentially declared disaster area.

"How the employer treats the absence depends on the size of the company," said Donna Childs, author of "Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses."

A small firm could choose wage replacement in its commercial insurance policy, she said, which would be part of business interruption coverage due to a covered peril. Other employers may allow employees to work remotely or may charge the days against paid leave.

Insurers respond to Hurricane Harvey
Insurers respond to Hurricane Harvey

Business interruption coverage typically covers physical damage and may apply to shutdowns, revenue losses and to pay fixed costs like salaries and health care for employees who can't work in a natural disaster, said Jim Whittle, chief claims counsel for the American Insurance Association.

Though there often isn't a deductible on pay, there may be a waiting period of up to 72 hours before coverage would kick in after disaster occurs, potentially leaving employees in a lurch if their employers won't or can't pay wages until the coverage takes effect.

Home-based workers need to buy commercial coverage to get business interruption benefits, as homeowner policies generally do not cover business-related damages.

Because commercial policies are often individually tailored to the company, the insurance association did not have data on what percentage of firms has elected it as part of their disaster preparedness plan, Whittle said. Flood insurance would need to be purchased separately.

If you're covered, "start the claim process as quickly as you can," Whittle said. "Insurers want to settle their claims as soon as possible, too."

"Keep careful records to substantiate your claim," Childs said.

In a presidentially declared disaster, Disaster Unemployment Assistance is also available to individuals whose work has been lost or interrupted.

Keep careful records to substantiate your claim.
Donna Childs

Managed by the U.S. Department of Labor and administered by each state's unemployment agency, the program covers both employees and the self-employed, whether you can't reach your job site, the job site is damaged or the job no longer exists.

You must be available and able to work unless an injury caused by the disaster limited your ability to do so or if you're trying to resume self-employment. You need to file for assistance online within 30 days of the announcement that funds are available. If you have no internet as a result of the event, you can call the Federal Emergency Management Administration's disaster line at 1-800-621-3362 for assistance, said Rita Egan, a FEMA spokeswoman.

People make their way out of a flooded neighborhood after it was inundated with rain water, remnants of Hurricane Harvey, on August 28, 2017 in Houston, Texas
Getty Images

Economic injury loans up to $2 million are available from the Small Business Administration in a federally declared disaster to pay for continuing and rebuilding operations. It does not replace lost revenue.

The IRS also offers relief in the event that a natural disaster causes tangible personal or business damages. It may allow an extended period of time to file a return and pay your taxes (victims of Hurricane Harvey are able to take advantage of this immediately).

Individuals and businesses in federally declared disaster areas can also deduct related losses not covered by insurance on an amended return from the previous year to get a refund immediately.

Though wage workers may temporarily lose income, a natural disaster can be an opportunity to earn overtime pay once the company is back in operation, said Peter Yang, co-founder of resume-writing company ResumeGo.

"With setbacks caused by the hurricane, businesses like mine are going to need employees to work more hours than usual in order to get things back on track," he said. "This could mean helping with rebuilding efforts, recovering lost data, handling a backed-up customer or reassessing the company's goals and future plans," Yang said.