Make sure that you have the contact information of your reporting manger and HR department in a diary or phone or a place where your spouse can access the same easily.
The magnitude and spread of COVID-19 across the globe is keeping us worried on two fronts. One is about our and our family’s health and the second is the impact of any such potential illness on our finances. Any critical illness can have a great impact on your savings. Often people worry about the length of illness, healthcare cost and potential impact on their income.
Here goes some immediate financial and practical precautions that everyone should take note of in the current uncertain times.
Often, many people think that health insurance is an unwarranted expenditure, which is not true. If you have adequate health insurance which covers major illnesses that are prevalent, then at least some part of cash outflow from your end is restricted because insurance covers the bulk of medical expenses as dictated in the insurance contract. For the uninsured, the financial consequences of illness are potentially far-reaching.
Revise your financial plan
The essential elements of your financial plan should be the following. To have adequate life insurance coverage, well-established emergency fund, well diversified portfolio within your risk tolerance level, participating in company sponsored group linked insurance schemes, etc. During a prolonged leave of absence from work, one should get out of long-term assets like equities or real estate and invest into more liquid assets such as bank fixed deposits or liquid funds to pay for treatment or even for living expenses in case of no salary or job loss. One should not delay this process as illiquid assets like real estate can take a significant time to sell. If your money is stuck in real estate, it may not be available when you need it. In comparison, you can redeem from open-ended mutual funds on any working day and get cash easily.
Assess from where you can access funds
Any extended leave owing to health condition is a strain on your financial situation and you need to conserve cash and there are multiple options available. For instance, you can think of surrendering your life insurance and get liquid cash. If you have already paid significant portion of your housing loan, consider availing additional leverage by using the same property. Use your credit card on need basis but amount spent should be within your repayment capacity and maintain as many liquid assets as you can in the short-term.
Whom to call in distress
Make sure that you have the contact information of your reporting manager and HR department in a diary or phone or a place where your spouse can access the same easily. It is important to keep your insurance cards handy. Nowadays, many insurance companies offer smartphone-based apps, and it is always a good idea to download all relevant information and keep your documents in your phone’s digital wallet.
To conclude, when illness strikes many of us tap into accumulated assets that are intended for other purposes such as retirement or children education, etc. Current environment is a good opportunity to reflect and understand how to incorporate protective measures into your portfolio to avoid any health induced financial difficulties in the future.
The writer is a professor of finance & accounting, IIM Tiruchirappalli