Planning for an unexpected medical event is like wearing your seatbelt. On any given day, we expect to drive safely to our destination, but we wear seatbelts every time we get in our car as a precaution.
Preparing for a medical emergency is similar: Proper planning can mitigate the financial obligations associated with unexpected health care episodes.
Here are a few basic steps people of all ages can take to make sure they’re prepared for a major medical event:
- Plan ahead: While no one likes to think of what might happen should they become incapacitated as a result of a medical emergency, it’s important to consider what information your caretaker might need to ensure you receive proper treatments. Centralizing important financial information and establishing a relationship with a trustworthy doctor ahead of time will simplify the process for your caretaker and ease their burden.
- Prearrange your legal affairs: A spouse or family member does not automatically have the legal right to manage your personal or medical affairs should you no longer be able to do so. Formally provide both health care and financial power of attorney to a trusted individual who can effectively handle your personal needs. In addition, updating estate plans, financial beneficiaries and living wills can minimize related costs to managing a health care crisis.
- Purchase insurance: Insurance exists to cover the unexpected. Buying life insurance, a hospital-care plan or long-term care will serve as a financial safety net for unanticipated crises. Moreover, when buying an insurance plan, consider adding disability coverage, which can protect up to 70% of your income in the event that an injury leaves you without a salary.
- Establish a cash reserve: When saving for retirement, you should factor in rising health care costs and emergency medical situations as likely expenses. However, you should also create a cash reserve that will cover your total expenses for a six month period. For younger individuals, storing your reserve in more fluid financial accounts, such as a savings or money market account, will be sufficient. For those nearing retirement, moving these assets into an income generating portfolio may be more useful.
Experiencing a health care emergency is a stressful event. By planning ahead, you can avoid causing you or your loved ones any further anxiety.
There are many options available; consult a CERTIFIED FINANCIAL PLANNER™ professional to better understand what steps you can take to prepare for an unforeseen health care crisis.
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