How To Set Up A Medical Reserve

As we grow older, a medical reserve becomes an important financial backup for emergency situations.

Among Asian countries, India had seen the highest medical inflation rate in 2021 at 14 per cent, according to a news article published in Livemint. We are rapidly moving towards an economy with rising inflation. As we age and approach 60+ years, age-related diseases increase, including the cost associated with medical treatments. Therefore, senior citizens must assess their financial preparedness for emergency medical situations and set up a medical reserve. 

Understanding the requirement

As a first step, you must sit with your children/well-wishers and discuss medical and financial preparedness. Then, ask yourself these questions:

Do I have enough health cover? 

Is it sufficient? If not, can I take a new one today? 

If not, what are the other financing options? 

A thumb rule is to have at least a base cover of Rs. 10 Lakhs and a top-up cover of Rs. 15-20 Lakhs per person. It is possible to get a health cover at the age of 55-60, depending on the health & pre-existing illness. However, after 60, options start getting limited. Here's why setting up a medical reserve comes in handy. Let us say you have a cover today for Rs. 10 Lakhs, then setting up a reserve for another 20 Lakhs would be ideal. However, this, again, depends on your health conditions and needs. Assessing the requirement is the first step.

Setting up the reserve

Once you have finalised the requirement, parking the money and identifying the sources becomes essential. The medical reserve can be split into three distinct parts. 

Invest one part in liquid funds/cash for easy access when needed. Another amount can be invested in equity instruments.

Invest the last part in gold instruments. 

This way, the reserve will earn an inflation-beating return and will not deplete with time. In addition, gold and debt instruments should be liquid for withdrawal during an emergency. 

 Documentation & accessibility of your Medical reserve

It is always a clever idea to send a copy of medical insurance papers and medical reserve account details to your children/ dependents.

First, check if all your medical and insurance documents are in order and accessible. Once you have all the information, plug the gaps where necessary.

Regarding documenting your medical report, take someone to help/ arrange the documents yourself sequentially.

As for insurance, all you need is the policy number or ID, and you can save these on the phone as telephone numbers under the heading' health insurance' or have copies of it pinned to your health file.

For your medical reserve, have the ATM card, PIN and other details handy in your phone, wallet or any other place you feel secure noting it down.

Introduce your children to your mutual fund advisor so that in case of redemption, they will be able to call the person directly. 

Have you set up a Medical reserve? Would you wish to add some more ideas here? Please add in the comments below.

Cover image courtesy: Pixabay