With the recent news of destructive tornados wiping out homes across the Midwest, it’s important for family child care providers to understand what they can do to protect themselves when a natural disaster strikes.
Follow this checklist.
1) Prepare an inventory of everything in your home. Take pictures of all your business and personal property and put the inventory and photos in your safe deposit box. The Inventory-Keeper will make this task easier.
2) Find out if your household property is adequately insured. Many homeowners’ insurance policies cover only up to $2,000 of business property. These policies usually define business property as items that are used in your business. Since most of the property in your home (furniture, appliances, etc.) is used in your business, many providers are surprised to find that most of their household items are not covered. To be sure you are covered, talk to your homeowner’s insurance agent and get assurances in writing that you are covered. You may need to purchase a business property insurance policy to be adequately insured. See my article “Are You Underinsured? Probably Yes.”
3) Look into purchasing business interruption insurance. This insurance pays for lost income, staying in a hotel, food, car rental and other living expenses after a natural disaster. You may be able to get this insurance through your homeowner’s insurance policy or your business liability insurance policy.
4) If you suffer a loss from a natural disaster (tornado, fire, hurricane, earthquake, flood, car accident, or act of vandalism) you may be able to deduct your casualty loss as a business expense. Damage that is covered by insurance is not deductible, but if it’s not covered you can deduct the business portion of your losses. See my Family Child Care Tax Workbook and Organizer for details.
5) Save receipts for your tax records when you buy new items to replace those that are damaged or destroyed. These can either be deducted right away or depreciated depending on what you purchase.
This checklist will make it easier for child care providers to get back on their feet again after a natural disaster.
Tom Copeland – www.tomcopelandblog.com
Image credit: computerclipart.com
For more information, see my book Family Child Care Legal and Insurance Guide.