COVID-19 pandemic: How to manage health insurance and emergency funds?

The COVID-19 pandemic has taught individuals the need for health insurance as well as emergency funds. There have been several cases wherein people have faced problems due to the absence of these important personal finance assets.

According to Abhinav Angirish, founder, Investonline.in, health insurance, just a year ago, was looked upon as an unnecessary expense. Though, today the situation is different.

"But having health insurance is not adequate," he stresses.

In this pandemic, health insurance has some exclusions. For instance, nebulizer kits, steam inhalers, thermometers, or sanitizers are not covered in health insurance.

Also, as Angirish points out, there are reports that policyholders are receiving only 50-55 percent of claims.

Having said that, it’s important that customers consider the scope of the coverage and weigh the balance between the premiums paid and the benefits the plan has to offer.

"If an individual is employed then he/she would be covered under group health insurance, but even then the cover would be limited to Rs 3-4 lakh. It is important to cover parents too, but the base policy doesn’t come cheap. Even if individuals manage to pay high premiums still the cover won’t be adequate. So, it makes sense to purchase super top-up plans which are relatively cheap,” he explains.

Talking about emergency funds, Angirish tells that it is often the most overlooked aspect of personal finance.

"In the wake of COVID-19 crisis, it however assumes importance. While building emergency funds often people ignore liquidity factors. While bank deposits may be safe, they do not offer liquidity. One can park their emergency funds in liquid funds which are equally safe. Besides liquidity, one can also get decent returns which can be reinvested to the corpus,” he suggests.

For emergency funds, it's always recommended to keep aside funds that can help an individual bear 6 months of overall expenses. Through access to these funds, any individual can tide through either income-impacting events like job loss or pay cuts or unexpected expenses like hospitalization when every essential medical item seems to be in short supply and spurious elements are trying to take advantage of the same.

Further, if one is confused about health insurance or investing in liquid funds, they should consult their financial advisor.

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