Sometimes financial aid administrators will be asked to make an adjustment for loss or damage to the family's primary residence. Such damage may have been inflicted by fire, hurricane, tornado, flood, or other natural disaster. Is it appropriate to make an adjustment for loss or damage to the family's primary residence, given that the net worth of the primary residence is excluded from consideration by the Federal need analysis methodology?

When families are faced with the aftermath of a natural disaster, they will have significant out of pocket expenses, no matter how good their insurance policy. For example, when the house is completely destroyed, the family will have to continue making mortgage payments until the insurance company settles with the lender, in addition to paying rent. (Amounts provided by the Red Cross usually cover only one month rent plus security deposit, and often only defray the costs.) In addition, the insurance may be insufficient to rebuild the structure and replace the family's belongings.

When a family is a victim of a natural disaster, their losses are not just limited to the physical structure of the house, but may include:

• contents of the house
• insurance deductibles
• underinsurance (lenders only require enough insurance to cover their financial interest, falling short of the cost of rebuilding and replacing belongings)
• temporary housing costs
• contents beyond the insurance allowances or contents that are difficult to document such as clothing, utensils, furnishings, etc.
• property taxes (they don't go down just because there's no house any more)
• delays in insurance reimbursement