Unexpected events and unplanned expenses are an unfortunate reality of life. Building a strong contingency plan is essential to managing emergency situations.
Let’s take the example of Murugesh V. (name changed to protect identity), a 32-year-old IT professional from Bangalore who was recently diagnosed with acute kidney failure that required dialysis, followed by a transplant. He is the sole breadwinner in a family of three, which includes his wife and 2-year-old daughter. He also has a Rs. 45 lakh home loan for which, he pays an EMI of Rs. 42,000 per month.
In the period leading to his transplant, Murugesh needed six months off work and was only able to work part-time after that. While his corporate health insurance covered his hospitalization expenses, the loss of income was a big blow to his family. Murugesh and his wife had to liquidate their investments and savings to pay for monthly expenses and other large expenses like their home loan EMI and daughter’s annual school fees.
Murugesh’s situation is not unique and can happen to anyone. To avoid financial stress, it’s crucial to build an emergency fund and make critical illness insurance a key part of this reserve.
Emergency funds help you manage unforeseen events like temporary unemployment and short-term medical emergencies. Critical illness insurance ensures that any large medical emergency does not impact your life goals and standard of living as you recover and get back on your feet.
Here are 3 ways how you can go about building a corpus for chronic illnesses:
- Buy a critical illness insurance plan so that any long or short-term illness does not leave a big hole in your pocket and on your savings.
- Save a small amount every month over and above your savings goal and park it for any medical emergencies.
- Allocate your assets keeping contingencies in mind and do not have a large exposure to risky assets.