Insurance coverage

SBA disaster loans versus insurance coverage after Louisiana hurricane

Louisiana experiences many types of natural disasters, but hurricanes pose the biggest threat, wreaking havoc on the coastal state every year. The impact of hurricane damage on businesses and homeowners can be devastating. homes are flooded, store inventory is destroyed, and high winds and debris batter roofs and windows. The cost of Louisiana hurricanes is high, and even those with insurance often have to pay significant expenses to recover.

Preparing for a hurricane is crucial. Trends over the past two decades have shown that the number of hurricanes has increased, along with their strength, leaving more people to pick up the pieces after a storm. In addition to having adequate home and business insurance, everyone should follow a hurricane preparedness checklist to make sure they’re prepared for a storm – and know what to do before and after.

Hurricanes can temporarily or permanently displace homeowners; structures and properties often require numerous repairs to make them habitable and safe. Personal property can be destroyed or lost, and water damage from hurricanes can cause financial loss and pose serious health risks due to dangerous, rapidly spreading mold growth.

The cost of repairing or rebuilding following a hurricane in Louisiana can be in the thousands of dollars, even hundreds of thousands or more. While every homeowner and business owner should have insurance, along with wind and flood damage coveragecollection of insurance proceeds is time consuming and requires extensive proof of loss.

Often the insurance does not cover the full amount of losses. Yet the average person cannot afford to pay out of pocket to repair properties and replace items. In these situations, disaster assistance in the form of physical disaster loans from the United States Small Business Administration (SBA) can help people recover quickly and without serious financial pressure.

What are SBA Physical Disaster Loans?

With the increasing devastation caused by hurricanes in Louisiana, many home and business owners are dealing with damages that cost more than their insurance policy covers. One solution is to apply for a physical disaster loan or an economic injury loan.

These SBA loans provide assistance to homeowners, renters, nonprofits, and businesses in the form of long-term, low-interest loans that can be requested after a hurricane. Those who live or own a business in a declared disaster area may be eligible for a physical disaster loan, also known as a physical damage loan, to help cover the cost of repairs and reconstructions, as well as damaged personal property or lost.

Disaster loans for homeowners

Property damage loans help homeowners who are unable to afford the costs associated with certain natural disasters, including hurricanes, that are not covered by insurance. But there are eligibility requirements and limitations:

  • Loans cannot be used for vacation properties or second homes.
  • Owners must live in a declared disaster area.
  • Loans cannot be used to retrofit or make additions to homes beyond building codes.

Homeowners can apply for up to $200,000 loan. Those who want to make improvements that would help prevent future property damage from storms may be eligible for additional assistance. Additionally, landlords and tenants could claim up to $40,000 to repair or replace personal property, such as clothing, furniture, and vehicles.

The low interest rate and long-term payment schedule are very attractive; the interest rate on property damage loans to homeowners unable to obtain credit from another source does not exceed 4%, and the repayment term is up to 30 years.

Business Disaster Loans

For businesses and most private nonprofit organizations, SBA Physical Disaster Assistance can help repair hurricane damage not covered by insurance. However, insurance proceeds affect the amount companies receive.

Since many Louisiana businesses suffer damage from hurricanes each year, this type of loan may be the best solution when dealing with additional costs. Loans can be up to $2 million, with an interest rate of no more than 4% for homeowners unable to obtain financial assistance elsewhere and an interest rate of 8% for those who can.

These disaster loans can be used to repair and replace not only a structure or property, but also machinery, equipment, store inventory, etc. Like homeowners, these loans cannot be used to upgrade or make additions to a business, but SBA Mitigation Assistance can be used to make improvements that help prevent or limit damage from future storms.

Economic Disaster Loans

The US Small Business Administration also offers economic disaster loans for small businesses, small agricultural cooperatives, and most private nonprofit organizations. Many businesses in Louisiana are forced to temporarily or permanently close after a hurricane because their finances cannot cover losses and/or operating costs while losses are recovered. An economic disaster loan can help homeowners meet these obligations until normal operations can resume.

Eligible businesses do not need to have suffered property damage to be eligible. A loan of up to $2 million can be requested, and the amount of assistance depends on the level of economic harm and the financial needs of the business. If the business is also applying for a property damage loan, the combined total of the two loans cannot exceed $2 million.

How to Apply for SBA Disaster Loans

The disaster loan assistance application process via SBA is quite simple. After confirming that you live or own a business in a declared disaster area and applying online, an inspector will estimate the cost of hurricane damage to your property and losses incurred.

You can track the status of your application online, and if you are found eligible and approved for a property damage loan or an economic damage loan, access to funds is usually relatively quick. Many applicants receive notice of their application within a month, and the loan could be available as early as a week after approval.

Difference Between Catastrophe Loans and Home and Business Insurance

Having adequate insurance is essential, but in many cases home and business insurance does not cover all damage and loss caused by these storms. When that happens, an SBA disaster loan can help homeowners avoid long paybacks without the pressure of high-interest, short-term loans.

While SBA disaster loans are requested after a hurricane – after the damage is done – home and business insurance is purchased in advance. In fact, it often takes 30 days for the insurance to take effect. Physical disaster loans are intended to cover what insurance does not cover, and the loan must be repaid over a specific period stated in the agreement. In contrast, insurance policies involve an annual premium to cover a fixed amount of property damage and other losses if a hurricane occurs in the future.

Be Prepared for Hurricanes in Louisiana

It is common for people to struggle for months or even years after a hurricane. This is the case for many Louisiana residents and business owners who suffered property damage from Hurricane Ida in 2021. Many people are still waiting for insurance proceeds amid an industry collapsing insurance. Know how navigate before and after hurricanes — having adequate insurance coverage and knowing what other financial aid is available, such as SBA physical disaster loans — can make all the difference.

It is important to note that flood coverage is not included in standard insurance policies in Louisiana. It must be purchased separately; without it, insurers won’t pay for damage to a home or personal property caused by a flood. Since 90% of natural disasters cause floods and the damage they can cause is significant, flood insurance should be part of every policy.

Unfortunately, insurers have been known to mistreat policyholders by refusing to pay for hurricane damage. But companies that act in “bad faith” can be held liable; you can sue an insurance company when they do not pay a valid hurricane claim. The Louisiana Hurricane Damage Lawyers At Herman, Herman & Katz have extensive experience representing victims of insurance companies who refuse to honor the terms set out in their hurricane insurance policy. Contact us online or call 1-844-943-7626 for a free consultation.