Emergency Fund

Put in place an emergency fund (ideally amounting to six months' expenses) to act as a buffer against unforeseen events. This fund is best created with a combination of a sweep-in account and a liquid or ultra-short term debt fund. Put three months' worth of expense in a fixed deposit with a sweep-in facility. Under the sweep-in, any amount beyond a threshold is automatically moved into a fixed deposit, earning a higher rate of interest.

Some funds like Reliance Money Manager Fund provide an ATM card which can be used to withdraw money instantly from the fund any time.

Insurance

For complete protection of yourself and your family, it is necessary to look beyond life insurance. A pure term plan will provide financial cover to your family in the event of your death. But this would be of no help if the policyholder meets with an accident and loses a limb. Supplement the term plan with an accident disability cover. To prevent any medical exigency wiping out your savings, opt for a family floater health plan that can reimburse such expenses.

A life insurance policy should ideally provide a cover of at least 8-10 times your annual income; health cover is best enhanced through a top-up plan to reduce costs.

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