During our life we face many uncertainties like loss of health, job loss, accidents, death etc. The recent worldwide economic slow down taught us many things. How do we survive Covid-19 like emergencies, says a lot about our capability to handle a crisis situation. Financial emergencies are dealt with by different people differently. But there are a few tailor-made and time-tested solutions sought by many of us from ages.
Life Insurance Plan: Not all the time we can take care of our families. We can secure ourselves and our family by getting a life cover. As per experts, the life insurance cover should consider both our assets and liabilities in hand. Normally an individual should get a term plan up to 10-20 times of the annual income, to be decided based on financial assets and liabilities. To pay off outstanding loans, a sum equivalent to the loan amount should be added to this cover so that the family does not suffer in case of the only earning individual’s unfortunate demise. Wife, children and dependent parents will benefit in case of sudden death of the only earning male member in a family.
Health Insurance: A health insurance plan that ensures coverage of all contingent medical expenses is a must in today’s times. Hospitalization including all before and after cost of hospitalization stay should be covered in the plan. The cost of treatment and subsequent job loss probabilities too can be considered to get a top up comprehensive health insurance plan.
Retirement corpus in the form of Pension: National Pension Scheme has seven service providers about which many people do not have any idea. Any earning individual can contribute towards this govt. sponsored scheme. At the time of retirement 60% of the fund can be withdrawn and the remaining 40% of the maturity amount can be either reimbursed or credited in the nominee’s account as a pension amount. If the account holder dies before attaining the age of 60 years, the nominee or the legal heir will be entitled to get the entire amount.
Building up an emergency fund: Liquidity is something that can help in difficulties. Developing a habit to save for unexpected life events is the first step towards getting ready against all odds. At least six months’ household and other emergency related funds should be kept readily available. Salaried employees should be ready for securing funds in case they are the only source of income. Due to medical expenses or loss of job, at least six months to a year’s financial planning should be made and liquid funds must be kept aside. Savings account, liquid debt funds or small schemes with easy exit options could be considered for liquidity purposes.
Natural Disasters: Geographical factors play a vital role while planning for contingencies. All the locations where earthquakes, floods, forest fires, or tornados take place frequently, preparations must be made to deal with them. Considering these factors, the insurers offer policies to cover unprecedented losses. Damage caused due to natural disasters can harm one’s house, car, or workplace. Ensure that such damages are fully met if any of the properties gets destroyed.
Last but not the least, Nomination is a must: All the actions taken to provide for the emergency finances will go wasted in absence of nomination. The nominee in case of pension, life insurance cover etc. should be clearly mentioned to make it available to the beloved members of the family. If there is a minor mentioned as a nominee then securing a guardian is also a must. In case of death confusions should not arise while handing over the maturity proceeds.
Smrutirekha Bhoi