How to build a corpus for medical expenses

Published: August 23, 2023 at 6:00 am

Everyone needs to build a corpus to handle medical expenses either in the near future or after retirement. I discuss simple ways to build a corpus for medical expenses in this article.

Remember that a corpus for medical expenses is not just for those who cannot buy health insurance due to ill health. Even those with a robust health cover need one. This is because, cashless claims cannot be taken for granted. The insurer might say, “pay for the bills and claim later”.

Also, as pointed out before, having one crore Super Top Up insurance is of little use if one does not have one crore of liquid assets. This is because many super top claims (especially if the base policy is from a different insurer) are settled in reimbursement mode, not cashless mode.

There are also other aspects:

  1. Health insurance for even a few lakhs is expensive, will increase with age, can increase if the insurer faces huge losses. See, for example: Claim rejection data for standalone health insurers for FY 2021-2022
  2. Health insurance will cover only medical expenses. Many non-medical expenses amount to 15-20% of a hospital bill.
  3. Health insurance will not cover lifestyle disease management – e.g. daily expenses for diabetes or heart health. You can use this cost of a chronic illness calculator to understand how dangerous this is.
  4. Critical and non-critical health costs can run several lakhs within days or months. A critical illness cover is also expensive and has a narrow coverage mandate.
  5. Premiums shoot up if the insurers report a loss, and this means the ability to increase our medical cover is limited with that insurer.

 


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

How to build a corpus for medical expenses?

Well, this is pretty much common sense.

  1. Invest more in your current long-term goals. For e.g. try and add at least Rs. 1000 to Rs. 5000 a month to your investments. I know it is hard, but not everyone can afford everything in life! So do what you can. Invest, say, 40% of that extra amount in fixed income and 60% in equity. Or pretty much in the same asset allocation of your long-term goals.
    • Rs. 5000 monthly for 15 years at 10% return results in a nearly 20 lakh corpus.
    • Increase the investment by Rs. 1000 more to get 4 lakhs extra.
  2. Invest as soon as possible. Time is essential to building wealth. The sooner you start and the more you invest, the bigger your corpus.
  3. Increase your investments at least 5% a year, preferably 10%. Not easy, but try; we must.
  4. Build a strong emergency fund: This will handle the bulk of your medical expenses soon. Read more: ₹e-Assemble Step 2: Lay the Foundations to Get Rich.
  5. Buy as much health insurance cover as early as possible and never stop it. This is essential to leat your medical expense corpus grow in peace without redemptions.
  6. Remember that it takes time! Wealth needs time to grow. So plan to touch your corpus only 15 years or so later. In the meantime, manage health issues with your health insurance and emergency fund. If you can’t buy insurance, then I am afraid it will haver to be only from the emergency fund.
  7. Do not forget about Things to do AFTER you buy a health insurance policy.

Planning for the medical expenses corpus

We shall use the freefincal robo advisory tool for this. This is a screenshot of the inputs page.

Robo advisory inputs for planning a medical expenses corpus
Robo advisory inputs for planning a medical expenses corpus
  1. After accounting for short-term and long-term goals, this assumes one has extra money to invest. Or it may be a mandatory goal for those who cannot be insured.
  2. Treat this as a non-recurring goal, like our child’s future goal.
  3. Assume that the money is required at the time of retirement.
  4. Use an inflation of at least 10%, preferably 12%.
  5. The tool has other options if you wish to plan a bit later or increase investments each year by a certain percentage.
  6. The current cost is a bit tricky. You can set this at Rs. 3L or Rs. 5L or Rs. 10L or even higher, depending on the result – the amount to be invested.
  7. The tool will output the asset allocation schedule to be followed. This is a screenshot.

Suggested asset allocation schedule by the freefincal robo advisory tool for building a medical expenses corpus

Suggested asset allocation schedule by the freefincal robo advisory tool for building a medical expenses corpusDon’t be worried if the results are scary. Start small. We invest what we can and take it from there – not much else can be done anyway!

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)