How To Manage Health Insurance And Emergency Funds

In the wake of pandemic induced job uncertainties, it is important to protect oneself and family during volatile times

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The second wave of COVID-19 has created unprecedented chaos and forced the healthcare system to be stretched at maximum. The management of health insurance and emergency funds have assumed even more importance.


A salaried individual would most likely be covered under group health insurance scheme. However, in the wake of pandemic induced job uncertainties it is important to protect oneself and family during volatile times.

Just a year ago, health insurance was looked upon as unnecessary expense. The pandemic has changed everything. Many are caught on the wrong foot due to lack of health insurance. Senior citizens are the worst affected group. As per data, senior citizens account for nearly 50 per cent deaths due to coronavirus in India. More importantly, it is difficult for a senior citizen to obtain a policy without co-pay clause and in some instances the co-pay cost can be as high as 25 per cent. Besides an insurance is just not enough. There have been instances of insurance companies disallowing certain expenses in COVID treatment. If you are inadequately covered you may have to bear huge expenses from your pocket.

Consider this, a senior citizen health insurance premium for INR 5 lakh policy could range between INR 20,000 and INR 25,000 per annum. Even then such cover might not suffice for COVID-19 treatment or other critical illnesses. Compared to this, a super top-up plan for INR 20 lakh costs around INR 10,000 a year. It makes sense to purchase a super top-up plan for self and family.  Super top-up plans seems to be a very good option to increase coverage without paying a hefty amount. It can be taken as a family floater thus ensuring complete peace of mind during the pandemic.

What to look for while purchasing health insurance policy?

  • Family floater option availability
  • Good incurred claims ratio
  • High settlement and low repudiation ratio

Some policies offer reinstatement of cover, i.e., if you exhaust the cover during a year, the insurer will "reinstate" the cover. You should check with your insurer before purchasing the health insurance policy.

Emergency funds are another important aspect of personal finance that should not be ignored. The pandemic has wrecked havoc on economies. The loss of employment or medical expenses can burden one’s finances. It may not be possible to meet expenses single-handedly from income. It is important to save, and once you begin, it will motivate to save more. While investing emergency funds one should keep the liquidity aspect in mind.  Many park their money in fixed deposits due to safety element. For people with zero risk tolerance fixed deposits are ideal. However, in times of emergency, premature withdrawal of the fixed deposit would attract penalty which defeats the entire purpose of parking the money in a fixed deposit.

In recent times Liquid funds have witnessed a rise in popularity. These funds are not only considered safe but also deliver higher returns than a regular savings account. The core objective of a liquid fund is providing capital protection and liquidity to the investors. Contrary to popular belief, liquid funds can be encashed anytime. More importantly, from the taxation perspective, if one holds liquid funds for three years, the gains arising out it are taxed as long term capital gains along with indexation benefit. Thus, compared to fixed deposits, liquid funds offer better liquidity at lower penalty charges.

In present times, it is important to manage one’s finances efficiently. Juggling with new challenges can be an everyday affair. Not all have savings to tide over emergencies. Assessment of one’s needs is crucial. A good financial advisor can help you assess your health insurance needs and suggest appropriate health insurance plan for you. Remember it is better to save for your future, but you must take care of your present too.