HOW TO PROTECT YOUR WEALTH

In the recent couple of years, I came across a few people that I’ve known succumbing to sudden heart attacks and all these were in their mid 30s or early 40s and the story has been quite the same; they suddenly had a discomfort and before a physician could attend, it was all over. I am sure most of you would have come across similar instances at some point in time. As morbid as it sounds, it is also seeming to be an increasing affair according to few studies. Such instances in the age group of 30-40 have increased, probably attributable to unhealthy food habits, reduced sleep, stressful work atmosphere, etc. There are a number of articles about healthy lifestyle and fitness tips, don’t worry, this is not one of that kind. Sometime back I learnt about an impact on a family after such an unexpected event, so thought of putting my views across and greatlysimplify some of those situations and see how to be prepared.

 MISSED THE KNIFE

You may argue that the extreme situation may not happen to everyone and medical facilities have improved, so chances of surviving such eventuality is quite high. You are absolutely correct and thanks to improvement in medical sciences, the average life expectancy has been going up and people are living longer than their ancestors used to. Now, this bring us to a tricky situation. While you could survive the blow, imagine the dent it is going to create in your finances. The advancing medical facilities have made it expensive and the expenses are not going down any time.  The below chart shows the movement of Health Insurance cost to overall inflation in the US.

In India, the story looks the same and the proportion if health related costs in inflation calculation has been going up.

Medical Inflation 2X than Overall Inflation!

Whether it is in the US or here in India, the medical expenses are growing almost twice the rate of the normal cost. The component of medical expenses to the overall inflation has also nearly doubled over the last five years in India. So, even if you are lucky to dodge the bullet, the cost will leave you significantly less wealthy. Ensure you are insured for such unexpected medical expenses through a proper health insurance scheme. Now, it is quite possible that your employer already provides such an insurance facility, but the cover may not be always sufficient. I seriously urge you to explore and consider a health insurance plan for you and your family for a reasonable amount and review the cover every 2-3 years for realistic medical expenditures. Check the inclusions, exclusions, cashless schemes etc well before signing up. And taking a health insurance early in your life will prove cheaper.

I HAVE LOANS, WHAT HAPPENS?

It is quite possible that you have some loans or life stage goals like child’s education, etc. An unexpected eventuality may put this entire plan at risk. It is important that each of us is insured for a sufficient amount that will take care of the loans and other future expenses for the family. While I am not technically qualified to advise you for the cover you need, I’m just trying to impress upon the importance of an insurance cover. Do your research!Remember one important aspect, insurance is NOT an investment scheme. If you have done this in the past, it is time to review them as a part of your portfolio under a professional guidance. Insurance is precisely what the word means, you hedge against the risk of any eventuality in your life. The cost of an insurance policy may not always be transparent and do your research before going for it. Also read up about the insurer’s claim settlement rate before buying an insurance policy. Claim Settlement rate is the percentage of claims that the insurers settle successfully. Lower rate means they REJECT that many more claims. For example, if insurer A has 95% settlement rate and B has 85%, this means the claim on your insurance has a 3X chance of being rejected by Insurer B. You may be wondering if insurance claim can be rejected; yes, they can be based on various exclusion and technical clauses. Please the read the terms and conditions very carefully before signing up for a policy. Read the exclusion criteria and your self declarations. For instance, if you are a smoker and you feel shy to tick that on the form, this can be a reason for the claim to be rejected.

BUT I HAVE SAVED ENOUGH

If you feel you have worked hard and saved enough for your family, still there are few important aspects that you need to remember. I know of a person who had a huge net worth (running into 10+ crores) passed away suddenly. Now the unfortunate part was that his wife didn’t know of his investments and she ended up running from one office to another to reconcile them. He had few share trading accounts, some physical gold in lockers, etc and she was not aware of any these. Now imagine her plight!

If you think this is one of the extreme freak cases, how does this piece of data sound? As of 2018, about INR 32,000 crore are lying in various bank and insurance as UNCLAIMED deposits. This doesn’t include unclaimed shares, mutual funds and lockers that are out there and are very difficult to identify. Perhaps some family member somewhere is trying to figure this out.I feel three important things are to be done to avoid these situations:

Discuss with your spouse about your investments. It is important that you share with at least two people in your family and they are aware of the various places where you’ve invested. List down your investments, bank accounts, locker details, etc in a proper record, physical or Excel sheet depending on your comfort. But never leave your family without information about your life long investments and savings

Nominee in every account or investment scheme to be included. A nominee is an automatic beneficiary for the investments in the case of any eventuality. You have the freedom to choose a nominee and you can change it any time you need. This takes away the unnecessary hassle for your family members, later.

Will is a legal document that lists down the beneficiary of your accounts and investments. It doesn’t mean you need to be having wealth worth 100 million to write a will. Even for the small wealth that you have created, it is important to prepare and register one.

Whether you believe in afterlife or not, it is quite certain that your family will have a LIFE AFTER yours. It is important to have a clear plan of their life after yours and that will make after life more peaceful! Make this simple step immediately while you continue to invest in your monthly SIP or bank deposits.

This is not an investment advisory. The intent is to simplify investment and financial protection related concepts. Please seek professional advice before investing!

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