Ensure All Is Not Lost

In May 2021, when Sulekha Sanyal, 37, a teacher at a private school in Delhi, lost her husband Arghya, 40, to the second wave of Covid, the pain was mind-numbing, but she couldn’t afford to be overtaken by grief. Not only was she the only emotional support for her nine-year-old daughter Aditri, she also found herself steeped in a financial crisis.

During the first wave of Covid, both Arghya, who used to work in the tourism sector, and Sanyal saw pay-cuts and were struggling with their household budget and paying their EMIs, utility bills and their daughter’s school fees. After Arghya’s passing, she was left with a debt burden and a single-and-uncertain income. She was forced to borrow money to pay the hospital bills as their health cover fell short. “I am not a permanent faculty member, so, in a way, I was financially dependent on Arghya. The tuition fee for the children of Covid-affected families was reduced but the other components of the fee had to be paid,” says Sanyal.

In the past almost two years, many families have lost their main breadwinner to the pandemic and have had to deal with financial difficulties along with the slippery slope of grief. The challenges in such a scenario are huge but there is no option but to face them and carve out a new life. The trick is to wade through the initial challenges and go on to make a long-term financial plan to provide security to the family.  

Picking Up The Pieces

The first step is to seek emotional support so that one can get into a mental framework that helps take important decisions, including finding solutions to money issues.

Soon after her husband’s death, Sanyal moved in with her parents for emotional support. She has immersed herself into caring for her daughter and into her teaching profession, both of which help her cope with the pain of losing a spouse.

With a strong frame of mind, one can be ready to take a look at the investment and insurance details that can come to the immediate rescue of the family, which is what Sanyal did. She used her husband’s Employees’ Provident Fund (EPF) payout to solve immediate monetary crisis and invested the balance in a plan that pays her regular income, which, along with her salary, takes care of her monthly expenses.

While Sanyal has managed to pick up some of the pieces after her loss, not all families are able to do. A common challenge that surfaces in such situations is that the surviving spouse is not aware of the partner’s financial details.

“This is a huge problem in India where one partner does not know the financial details of the other. I recommend that you make a document that contains all the details of all financial investments and insurance, and give that to your partner (to be used) in case of any unfortunate event,” says Melvin Joseph, a Sebi-registered investment advisor, and managing partner, Finvin Financial Planners, a financial planning firm.  

To gather such details, the best way to start is to contact the agents or advisors the deceased spouse used to meet or call. “Try checking your partner’s phone, laptop or computer and papers or files. Otherwise, one can approach the authorities that manage the investments,” advises Sachin Parekh, a financial planner associated with Save N Protect Financial Planners (SNPFP), a financial planning firm in Mumbai.  

Securing The Future

Once the immediate financial crisis is taken care of, the issue of long-term stability needs to be addressed on a priority. After all, the finances of a single-income household are bound to be different from the financial planning point of view.  

“First, take existing investments into account. Then, define goals and see how existing investments can help achieve these goals. Third, if the single parent is already working or planning to work in the future, do asset allocation as per the goals,” says Joseph.  

Protection should be the first aspect to be tackled once the goals are defined. The Covid pandemic further highlighted the importance of having adequate life and health insurance. For instance, says Sanyal, their health insurance cover of Rs 5 lakh fell short when the hospital bill for her husband came to around `9.5 lakh. Since then, Sanyal has increased the family’s health coverage to Rs 20 lakh.  

“The minimum health cover should be Rs 25-30 lakh. If a family already have a base sum insured of Rs 5-10 lakh, the additional amount can be increased through a super top-up policy. If they do not have any health insurance, they can buy a mix of base and super top-up policy,” says Joseph. A super top-up policy is cheaper than the main health insurance policy as it has a high deductible (the amount of claim the policy won’t cover).

Taking a term cover, the cheapest and simplest form of life insurance, is recommended to secure the future of the dependants of the surviving spouse who has a source of income.  

Systematic investments to cater to long-term goals such as children’s education should be next on the agenda. “Any insurance money or settlement received after the death of the partner should be invested carefully to ensure the future of the child or monthly expenses of the other partner,” says Joseph. Sanyal plans to rent out her apartment, so that “I have an extra source of income and can save and invest for my daughter’s education”.  

Investing for education is a high-priority goal for most parents. But to choose the right investment avenue, consider the goal’s horizon. The amount required till higher education should be kept in liquid or debt funds if the parent has existing resources, or the funds can be maintained using salary if the parent plans to work, suggests Joseph. “For higher education, the amount can be invested in debt funds if the goal is less than seven years away. For a longer time period, the equity-debt allocation can be decided on the basis of the goal duration, risk profile and risk-taking ability of the parent,” he adds.

The amount of investment depends on the earning capacity of the surviving spouse. The decision to stop or continue earlier investments would also depend on any change in goals.  

The passing of one partner means the surviving partner is often suddenly left with all the decisions. Therefore, it is crucial to avoid making random investments. “It is important to consult a finance expert who is not a distributor and decide the asset allocation as per the goals… Listening to free advice can land the person in a bad financial situation,” says Joseph.  

While it is difficult to fill the emotional gap left by the demise of a partner, taking care of the financial needs eases at least some of the difficulties. Sanyal, who hopes to get a permanent job soon, spends most of her free time with her daughter and believes that will heal both of them over time.

pushpita@outlookindia.com