28-year-old Alisha is a diligent investor. She saves a portion of her money every month without fail.
Here’s how her money bag looks like:
|Bank account balance||Rs 35,000|
|Emergency Fund||Rs 50,000|
|Public Provident Fund||Rs 3 lakh|
|Fixed deposit||Rs 1 lakh|
|Recurring deposit||Rs 2,000/month|
Recently, she started a monthly investment of Rs 3,000 in Mutual Funds. Her financial advisor informed her that with a return of 12%, her money could grow to Rs 1.15 crore in 32 years—in time for her retirement.
In addition, she started another fund to amass money for her wedding in two years. She tried to save whatever money was left in the month for this purpose.
And so, Alisha was happy and confident of her financial security…
…Until life hit her hard
A few months later, Alisha got into a massive accident while travelling with her family. This is what her injury sheet looked like:
- Whiplash of the neck and upper back
- Severe cut in the forehead that resulted in loss of blood
- Minor damage to the skull
- Three broken ribs
- Damage to the knee joint
- Fracture of the left thigh bone that required an operation
- Haemorrhaging in the left side of the brain
Her hospital bill crossed Rs 4.5 lakh. Plus, she was bed ridden for three-four months. This meant loss of pay. Her parents and brother also faced similar injuries of varying degrees. So the total financial liability exceeded over Rs 5 lakh.
At this time, she had:
- Rs 2 lakh from the car insurance accident cover
- Rs 1 lakh from the Fixed Deposit
- Rs 12,500 from her MF and RD investments.
This means, she needed to borrow around Rs 2 lakh to pay for the remaining bills. After all, her investments needed time to grow. Plus, the PPF investment had a lock-in of 15 years.
What could have helped her?
Did you notice an important product was missing in her portfolio?
Yes, Alisha failed to get health and life insurance policies. Even one of the two could have helped a lot during such a tiring situation.
This is because an insurance policy is available constantly. The sum assured may not be in your bank account, but it’s just one claim away. But the same amount would take you years to earn through investments.
Let’s have a look:
- Life insurance premium: Rs 6,500
- Sum assured: Rs 2 crore
- Time taken for an investment to get this money: 24.25 years
- Time taken for the insurance to get you this money: 1 month
Your money chart essentially looks like this:
(X axis = Year; Y axis = Money value)
Why Life insurance for medical problems?
You could be wondering why we are talking about using a life insurance for medical emergencies. Your query is valid. After all, traditionally, life insurance is associated with a death benefit. Who thinks of life insurance helping during their living years!
But the fact is, life insurance—even a simple one like Term Life Insurance—can come handy during medical problems.
- Term life insurance plans offer Accident protection. This ensures you get a lump-sum amount in case of an accident. In some cases, it could be linked to your medical bills. But the end result is that your savings are protected.
- Term life insurance plans offer Disability cover. In case of a severe disability, the insurance policy can offer a lump-sum amount. This is to help you deal with loss of income and other expenses.
- Many term life insurance plans offer critical illness support too. In such plans, a mere diagnosis can make you eligible for a lump-sum payout of lakhs and even crores of rupees. This, thus, can take care of all your medical expenses.
Remember, all these benefits are available for you from the time you buy your life insurance policy. It does not require you to wait for years. Plus, many lenders also allow you to borrow money against your insurance policy. This can act as an additional layer of protection.
So think about it: In case of a medical emergency, would you not want insurance by your side?