A friend called up and said ‘My dad just cancelled his Medical Insurance policy by NOT PAYING the premium what can I do?’

This was clear – his parents aged 76 and 74 CANCELLED their medical insurance because they felt that they were not claiming ever..they did not NEED medical insurance. They actually had their reason too – they had paid premia for 20 odd years and had not made any claim. They also felt that they had ‘enough’ of money to pay for a medical expense and therefore did not need medical insurance.

His father had made a ‘Fixed deposit’ with a real bad company – and lost Rs. 1.5 L -yes he had about Rs. 2 crores in equity and property (not including his residence) and maybe he had enough. He was actually chasing about 2% extra return that he could have got.

To me these decisions were scary – clear risks of Cognitive Decline. As our age increases our ability to take decreases. To me one awesome proof is the lousy movies which Dev Anand made as he got older. This man had no business to stop his medical insurance – exactly at a time when he was becoming uninsurable. Amazingly stupid. That too after having built a 20 year track record. Instead he could have held the insured amount constant – and not bothered about inflation. Having said that I recently lost 2 uncles and one aunt – all past 87 – and none of them carried any medical insurance.

It is scary to know that people do not worry or care about Cognitive Decline when it comes to the money decisions. I know many people in their 70s who are indifferent to this problem. Their children are amazingly stupid or amazingly worse. Their common refrain is “My parents have money and my dad is looking after it…I will not ask what they are doing with it”. Great combination of parent and children.

If you are 70+ and reading this article, here are my suggestions for you:

  • stop taking financial decisions ALONE
  • Run every decision of more than Rs. 500 past a ‘money confidante’ – could be son, daughter, son-in-law, niece, friend
  • Keep a lot of things in writing
  • Come down to index fund, annuity, pension, debt fund, bank fixed deposits
  • If you MUST have direct equities – get the money confidante to take the decisions
  • UNDERSTAND THAT YOU ARE ON A COGNITIVE DECLINE, and accept it
  • Get your children to be involved in your finances
  • Write all your cheques once or twice a MONTH in the presence of your children or money confidante
  • If appropriate make your children the joint holder in your accounts and leave your financial documents with them
  • as part of cognitive decline you might be in denial even if you lose money
  • you may HIDE mistakes from your kids – be aware

If you are a 50 year old struggling with the egos of a 76 year old parent handling their own money, do the following:

  • keep cheque book under lock and key
  • put ‘not over Rs. 5000’ in the cheques that you leave with your parents
  • go with them to the atm and encourage them to use it in your presence – inside the booth or outside
  • make all the payments online so there is no need for them to do any transactions
  • take charge of payments like medical insurance so that the policy does not lapse
  • use compulsion or force if necessary – pleasantness is not as important as financial safety
  • get them to write cheques in your presence
  • get passbooks updated more often
  • put a sms alert for all transactions – DO NOT PUT A LIMIT – the thief is likely to fly under the radar
  • get to keep things in writing
  • Keep their ego intact, but move away from a pure equity portfolio
  • I have full 100% control over my parents portfolio – except TRUST that they will have money whenever they need and whatever the amount, they have nothing else. Hey it is fine, at some stage this will happen.
  • I know friends and relatives struggle with tons of paper work after a person dies
  • I know children who will not take charge today – the cost is going to be damn expensive

http://www.subramoney.com/2015/06/who-will-manage-your-portfolio-when-you-cannot/

 

lots more to add…really tons…has to be more posts…

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  1. lakshminarasimman

    of late i have realized why our ancestors prescribed vanaprastham after 50 and sanyasam after 75

    things have become too complex

    rajini or vairamathu is right when he said if you live beyond 64, there is no peace.

  2. Well written.
    How do you approach the discussion with your parents?
    These days parents are staying alone and children are far off visiting once a year !

  3. Dear Subra Sir, I have a family floater plan with Apollo Munich. I have recently shifted my work to middle east, plan to stay here for 5-7 yrs. Should I continue with my health insurance plan in India or biy it later when I come back. The company will provide me with health insurance during my work in middle east. Wanted experts opinion? Thanks in advance.

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