How To Manage Financially In Case Of A Medical Emergency
A medical emergency can present itself anytime, anywhere. So, it's prudent to stay prepared. Fortunately, there are several avenues at your disposal when faced with a financial challenge in the event of a medical emergency.
Imagine someone in your family who has to undergo a bone marrow transplant. In addition to the stress of having a loved one undergo a life-threatening surgery, you are faced with the prospect of footing medical bills that will run into tens of lakhs, if not more.
In such a dooms-day scenario, what is your way out? Running high credit card bills? Health insurance? Investment liquidation? Or should you take a loan? Read on to find out.
Can Your Employer Help?
Have a stable job? You're in good hands!
Almost all large or mid-sized companies that offer full-time employment also provide health insurance as a workplace benefit. Additionally, they also subsidize the insurance premiums of their employees, including their children, spouses, and dependents.
How About An Emergency Fund?
As ideas go, this is not a bad one. Imagine a safety net, something to fall back on in the event of a financial emergency.
The rule of thumb to creating a financial emergency corpus is that it should preferably last you for a good six months.
When starting a financial emergency fund, don't forget the rule of thumb. Also, if it's worth doing, its worth doing well.
Maintain the financial emergency fund religiously. Make sure that you transfer a predetermined amount every month without fail. Unless, of course, it's a financial emergency!
A good practice is to create a wholly separate bank account for this purpose. Alternatively, you could also invest in an instrument that can be liquidated with ease while delivering a decent rate of return.
The first step is always the hardest. Fortunately, once you start saving, it gets easier. With every passing month, you'll be able to save more.
Don't lose sight of the reason you got into the financial emergency fund in the first place. The fund is for a medical emergency and not for the latest accessories to your smartphone.
All said and done, this is the most common remedy from financial challenges during a medical emergency. As already discussed before, if you are a full-time employee of an organization that provides health insurance, you're saved.
However, if you're self-employed, you should ensure that you and your family are covered. Subject to the amount of premium you're willing to pay, you can avail a host of insurance options.
Subject to the plan of your choice, you can either pay the premium monthly or annually. There are 2 ways in which an Insurance company reimburses its takers.
One way is to offer hospital services in a cashless manner to a patient in a hospital that is within the insurance network. The other is to reimburse the cost that has been incurred.
Furthermore, medical insurance is tax exempted under section 80D of the Income Tax Act, 1961.
No, Selling Physical Assets Is Not The Answer
Unfortunately, most of us do not really take adequate precautions to prepare for a rainy day. This puts us in the spot when it comes to dealing with a medical emergency.
In addition to a series of steps that you can take in order to face a medical emergency, there are pitfalls you should avoid at any cost.
One of these pitfalls is to look upon physical assets such as gold and real estate as a source of money, especially during a financial emergency.
Of all assets, real estate is the least liquid one. Selling it during a boom can sometimes be daunting. Trying to sell it in a rush, such as when you need urgent cash, is even worse.
A distress sale will severely hurt your bargaining power which, in the worst-case scenario, could altogether defeat the very purpose of your sale in the first place.
Rule of thumb? Never rely on real estate to bail you out during a rainy day.
Compared to real estate, gold is an easier sell. Having said that, recovering the full value is always difficult. During the purchase, the making charges will always be deducted by the buyer. This includes bars as well as jewelry.
Additionally, the purity of gold is also an issue. To be sure, gold is more liquid than real estate. At the same time, it is always a hard sell. What complicates selling gold further are the sentiments, nostalgia, and memories that people associate with their gold.
At mPokket, we understand that, despite your prudent financial planning, from time to time, you may face a financial emergency of some form. During those testing moments, you'll need a trusted friend by your side, someone who will not just provide moral support but will help you out financially as well.
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