A lot of you may not like reading this post due to the nature of the topic. But it is important for the sake of our loved ones that we discuss this important issue today.
Side Note: You may find this article to be too long (2000 words!). I considered dividing this article into two or three small articles (that would have helped me increase the article count too), but I decided against that. This is an important topic and should be covered in one go.
We take a life insurance policy to ensure that our family is well-provided for in case something happens to us.
We pay thousands of rupees in premium for health insurance policies.
We make sacrifices to save money for our kids education, for our parents and our spouse’s comfort.
Would our family members know how to claim the insurance policy in case of our untimely death?
Do they know how to withdraw the money from our bank accounts if we are hospitalized and not in a position to share the PIN?
Do they know about the medical insurance policy that we took out in our name or the one that our employer provided?
Are they aware of the various instruments in which we have invested our money?
If your answer is no to any of the above questions, just imagine the struggle your family might have to go through in your absence.
There is no bigger truth than the uncertainty of life. I saw a retired relative struggle for money after the sudden demise of his son a few years ago because he had no idea how to get the insurance money and did not know where all his son had invested. I recently got to know about a junior from the college, a young guy in his 20s, who is in a coma due to brain hemorrhage and his parents are struggling for his treatment.
The point of the above examples is not to scare you or paint a grim picture, but to show you the importance of equipping our family members to deal with such scenarios.
Steps To Prepare Our Family For Any Unfortunate Incident
Preparing your family to deal with financial issues in your absence is not that difficult. It just needs some planning. I have divided this into four steps:
- Purchase term insurance for yourself, and medical insurance for yourself and your family members if you haven’t already. Even if you have a medical insurance policy from your employer, still purchase a personal policy. What if you are in between jobs when something unfortunate happens to you? Your employer’s medical policy might not cover you then. It is important to be prepared for the worst when planning for emergencies. Here are a few practical tips that might help you:
Tips for Managing Your Personal Finances
- Add a nominee in all your bank accounts, mutual funds, shares, ppf, epf, nps and any other investments that you have made. Most of the institutes provide an online facility of adding the nominee, so this should not take much time or effort. Here is an article that talks about the process of adding nominee in EPF.
- Make a detailed note of all your finances somewhere. We will discuss how to go about this in the next few paragraphs.
- Decide how to share this information with your family in a safe, secure and easily accessible manner. We will discuss a few ways of doing that in the next few paragraphs.
Let’s look at the last two steps in detail.
Emergency Kit – Collecting The Essential Information In One Place
The first step towards preparing your family for an emergency is to have all the essential information in one place. Here is a list that can help you collect this information. You can either have this information in a word doc/google doc or in a diary – preferably a fresh one that you will use just for this purpose.
One thing to keep in mind while adding these details – add the least possible information which can be sufficient for your family members to get what they are looking for. You don’t want them to get overwhelmed with a lot of information, but at the same time you want them to have all the details necessary to take control of things.
Section 1: A Note To Your Family Member
On the first page write a short note to your family member telling them what to expect in the next few pages. They will need some self-assurance in your absence, tell them to be strong, not to trust anyone blindly with the money, and to follow the guidelines in the next few pages sincerely.
Section 2: ID Numbers
Note down all your ID numbers on one page. This includes your aadhar, passport, pan card and any other id cards that you hold.
Get a photocopy of all these id cards and self-attest them. If you have a marriage certificate have a copy of that as well. Put all of this in an envelope.
Get a soft copy of all these id cards, store them in a folder in Dropbox or Google Drive (or any online storage that you use). Note down the location of that folder on this page. We’ll use this folder to store a few other docs also later.
I use the free version of Dropbox and prefer it over Google Drive. If you are new to it, you can install it from –> this link <– to get 500 MB extra space.
Section 3: Life Insurance Policy
Note down the following details in the next page
- Name of Insurance Provider
- Policy Number
- Policy Amount
- Nominee Name
- Expiry Date
Get a physical copy of the policy and the last premium paid receipt and keep that in an envelope.
Get a soft copy of the same and keep it in the same location (add a subfolder to keep it more organized if you want to) as the id cards.
Section 4: Health Insurance Policy
Divide this section into two sub-sections. One for your personal health insurance policy and one for corporate policy in case you have that.
In the subsection for personal health insurance, add the following details:
- Name of Insurance Provider
- Policy Number
- Covered Amount
- Expiry Date
- Contact Person (e.g. TPA Number)
Get a physical copy of the policy, last premium paid receipt, contact details of the TPA, list of authorized hospitals and keep that in an envelope.
Get a soft copy of these docs and keep them in the same location as the other documents.
In the subsection for the corporate policy, along with the details mentioned above, also add the contact details of your HR and some of your colleagues who can help your family with the process.
The corporate policies also provide some lumpsum amount in case of accident, disability or death of the employee. If your corporate policy covers that then make a note of that as well.
Section 5: Bank Account Details
Add details of all your bank accounts in the following manner.
- Bank Name
- Account Number
- Nominee Name
While this information (along with the death certificate) should be sufficient for your nominee to get the funds from your account, what if you are hospitalized and your family needs to withdraw cash?
That’s where it gets tricky. It is not safe to reveal your ATM PIN or internet banking id and password details in a notebook or in an unencrypted doc online. But at the same time, it is critical for your family to have this information.
There are a few options that you can use to share this critical information in a secure manner:
- preferred approach: if your family is technically savvy then you can store these details in a secure note in a password manager and add your family members to that account. Then in the diary (or doc) ask the family members to check the note stored in their password manager. Bitwarden, which is a free and open-source password manager, has an option where you can add other members to your account and share only selected notes with them. This way you won’t have to share your password with them, they will access the information from their Bitwarden account.
Note that if you are going with this option, think of the least technically savvy person in your family – if the other members are also not available, then would the least technically savvy person be able to access this information? If not, you must try to educate them on how to use this tool.
Let me know in case you are not aware of how to use a password manager and would like me to cover this topic in another blog post
- if the above-mentioned approach is not feasible for you, then you will have to write down the details in the same diary (or doc). But that means you will have to pay extra attention to the security of this diary (or doc) – we will come to that in a moment.
Section 6: Investment Details
In this section add details of all your investments – PPF, EPF, NPS, Shares, Mutual Funds, Properties etc.
You know the drill by now.
Add the name of the brokerage firm you are dealing with for mutual funds, shares, bonds, etc.
Add your UAN number and PF number, PPF number, the bank where you have PPF account, etc.
In case these investments can be viewed online, you should provide the credentials in a secure manner described in the last section.
Section 7: Liabilities
In this section add all your outstanding liabilities – details of any loans that you have taken, credit cards that you own, money that you have borrowed from someone, etc.
Section 8: People To Contact
Add names and contact numbers of trusted people who can help your family members with various issues they might face while they are getting back on their feet. Also mention what issues they can help with. For e.g., a close friend working in a bank can guide them through bank related issues.
How To Share The Emergency Kit With Your Family In A Secure Manner?
Now that you have all the information in one place, comes to the next step – how do you share this with your family so that they can access it easily if ever such a need arises, but at the same time ensuring the security of this critical information?
In case you have stored this information in a word doc, you can put it in a pen drive, encrypt the pen drive, store the decryption password in a password manager like Bitwarden (making use of the shared account feature) and let your family members know how to use Bitwarden to get this password. Then keep this pen drive in a safe place in your home, and let your family know where to find it.
If you have stored this information in a diary, along with your bank credentials, then you should not take a chance and keep this in a bank locker. I won’t trust any other place apart from this. If the diary only contains account numbers and not any credentials or PINs, then you can keep it in a locker in your home also. Do let your family know about its existence.
If you are going with a bank locker, then make sure to have all the dependent family members added to it – not just your spouse. And if you are staying away from your parents, then it would be better if you open this locker in your hometown, so that if something happens to you, your parents can take charge of the situation from there.
If you have read till here, it shows that you understand the importance of this topic. So, without wasting any more time, start preparing the emergency kit for your family.
If you already have such a system in place, do share the process you follow in the comment section below so that we all can benefit.
Check this list of other articles before you leave.
When not writing blogs, Anshul could be found working on interesting data analytics problems at Uber. Though he does not have a degree in finance – he holds a B.Tech degree from NIT Jaipur – his interest in the field has made him learn the nuances of personal finance management.