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Sunday, June 13, 2021

Ways to protect your financial wealth during the COVID-19 crisis

During trying times like these, the physical health of you and your loved ones is one thing that matters the most; the next most important thing right now is financial stability.

May 25, 2021 5:58:03 pm
It is time we prioritize our financial wellbeing and make sure that we are guarded against any unforeseen financial crises. (Representative image: Pixabay)

Written by Vaidyanathan Ramani

The world around us has changed more over the course of 12 months, than perhaps at any point in our lifetimes. The deadly coronavirus has morphed into a global pandemic, destroying lives, jobs, world economies, and personal wealth at a rapid pace. During trying times like these, the physical health of you and your loved ones is one thing that matters the most; the next most important thing right now is financial stability.

Invest in health and life insurance plans

With the country reporting more than 3.5 Lakh COVID-19 positive cases and 3,500 deaths every day for the last one month, it is time we all realize that the situation is grave. It is time we prioritize our financial wellbeing and make sure that we are guarded against any unforeseen financial crises.

Considering the rising number of COVID-19 positive cases and with reports floating that the virus has become airborne, you may never know when you or your family members might just get infected with the deadly virus. And god forbidden, if the conditions get worse you or your family members may also need immediate hospitalisation.

Currently, the average hospitalisation cost for 15-day treatment for COVID-19 comes around Rs 8 lakh – Rs 12 lakh and for a person with comorbidities, the cost may go as high as Rs 20 – Rs 25 lakh. Under such a scenario, if a person is not covered under a comprehensive health insurance plan, the entire cost needs to be made from your own pocket that may not be possible for everyone.

To stay protected against any such situation, it is best advised to cover yourself and your family members under a comprehensive health insurance plan with the adequate sum insured. Your health insurance plan will cover you against all possible illnesses including COVID-19 by paying hospitalisation costs up to the total sum insured.

Similarly, you must also timely invest in a term life insurance plan if you have any financial dependents. A term life insurance plan is a pure protection plan that pays the financial dependents the entire sum assured in case of demise of the policyholder within the policy term.

On directions of IRDAI – the insurance regulator – insurers have also started covering death due to COVID-19 in basic term plans. A term plan is of utmost importance today considering the prevailing conditions where the double mutant of coronavirus is largely affecting the young working population of the country.

Under the current conditions, it is best to cover yourself under maximum sum assured through a term life cover so that the dependents can manage the various expenses in case of your absence including daily needs, child’s education and marriage, and retirement of the spouse.

Manage liquidity

During unprecedented times like these, many businesses and trade can be severely impacted. This can in turn lead to loss of revenue for those who run their own enterprise while for others who work in these businesses, pay cuts, and job losses can become common.

It is recommended to maintain a supply of cash and cash equivalents to pay 3-6 times of your family’s monthly expenses. During current times, having such an emergency fund in hand would be handy. Also, be sure to put all your non-urgent expenses on hold.

It is also recommended to switch to digital payments in place of physical cash wherever possible. You may also consider reducing a portion of your payments towards retirement corpus in order to build an emergency fund. However, be careful to not seriously affect the long-term corpus, as it is your biggest hedge against expenses at old age.

Do not stop investing

When managing your finances, remember that playing the (stock) market without adequate knowledge is dangerous and can lead to bankruptcy. Learn and understand the trends to take the right action of your portfolio that may have been built over several years.

Many analysts indicate that investing money in the market (in the right set of stocks of course) when it is down is a sensible method to earn good returns when the economy bounces back and the markets reflect the growth. One may need to be patient and have a long-term view when investing here but if the broader economic story is not hurt and you expect the economy to bounce back to normalcy, the markets and its major participants will end up owing that growth.

Sharp market downturns generally produce tremendous returns – as seen during the first wave of COVID-19 pandemic in the country. If you are afraid of investing directly in the equity markets, then consider guaranteed insurance plans that offer better returns than simple fixed deposits that offer diminishing returns in such downturns.

There are numerous such products available in the market including Capital Guaranteed Products and Guaranteed Return Products that promise you guaranteed returns and allow you to lock in the rate of interest for a maximum of 45-years.

Take note

The ongoing COVID-19 pandemic has indeed led to an unprecedented financial crisis at a pace none of us has ever seen in our lifetimes. From what the experts say, there is no immediate end in sight for this calamity and we may be expected to live with COVID-19 in our midst for the next 3-4 years. It is therefore important to maintain a positive outlook and remind ourselves that the world has a history of overcoming such grave challenges.

During such hard times, it is of utmost importance to focus on our families and protect their health and wealth. By simply following the aforementioned steps, we all can keep our family’s financial future safe, regardless of how long this pandemic lasts.

The author is Head-Product & Innovations at Views expressed are that of the author.

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