Health Insurance Plans vs Health Savings Accounts: Which One is Right For You?

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Health Insurance Plans vs Health Savings Accounts: Which One is Right For You?

Saving for your health cannot be emphasised enough. Especially post-COVID, the unbearable medical treatment costs have raised the alarm among people to ensure adequate savings for unprecedented medical emergencies. Apart from health insurance plans, an emerging healthcare security plan is– Health Savings Account. 

Read on to learn the difference between the two types of healthcare security instruments and how to choose the right one for your family. 

What is Health Savings Account (HSA)?

A Health Savings Account is similar to a savings account opened with a bank to park funds toward unforeseen medical and healthcare needs. You can open a regular or specialised health savings account to serve this purpose. Also, some banks offer benefits similar to a health insurance policy, like the sum insured and coverage for certain hospitalisation expenses. 

Difference Between Health Insurance Plans and Health Savings Accounts

Factors Health Insurance Health Savings Account
Definition Health Insurance is an agreement wherein an insurer promises to bear the medical and hospitalisation expenses of the insured person. A policy offers various coverage options and the facility to add multiple members. Health Savings Account is a type of savings account opened with a bank to save emergency funds for one or multiple individuals' medical and healthcare needs. HSA needs a minimum balance of funds and comes with listed benefits as specified by banks.
Money Movement Under a health policy, you pay an annual premium for coverage up to a specific sum insured with other benefits like ambulance cover, no-claim bonus, etc. Under a health savings account, you can park some funds toward healthcare and medical emergencies. Here, you can reserve the funds and decide the amount at your convenience.
Offered By Insurance companies and aggregators provide health insurance policies. You can open a health savings account with a bank or financial institution.
Tenure You can opt for a health policy for 1, 2 or 3 years. Though, you can renew the policy every year on a lifelong basis. You can open a health savings account for as long as you need. Generally, HSAs are held for one’s lifetime.
Interest Rate You do not earn any interest on the sum insured amount under a health insurance policy. You receive coverage benefits for a regular payment of the premium amount. You can earn interest up to 8% per annum on a health savings account, depending upon your bank’s policy and terms.
Minimum Value There is no minimum balance required to be maintained under a health policy. Depending on your budget and needs, you can opt for the sum insured and coverage. Some banks and institutions set criteria of maintaining at least INR 25,000 of fund balance in your health savings account. However, the rule does not apply to every bank.

Which is Better for You– Health Insurance or Health Savings Account?

To help you choose the right health security plan, here are some factors to consider:

1) Identify Your Medical Needs & Policy Coverage 

Whether you need to cover yourself or your family under a health plan, it is important to consider the healthcare needs of every member. You should choose the coverage and benefits based on the members' age groups and health conditions. Also, you must note that while you have sufficient emergency funds under health insurance, a health savings account might not be able to cover all the healthcare expenses of your family. 

2) Choose Insurance Benefits Wisely

A health insurance policy offers several medical and non-medical health coverage options, including pre and post-hospitalisation coverage, daycare treatments, annual health check-ups, no-claim bonuses, ambulance cover, etc. On the other hand, a health savings account might not provide coverage for these benefits and need certain features. 

3) Consider the Money Movement & Interest Earned

If you prioritise saving money towards healthcare without following any regular payouts, a health savings account is the choice for you. Besides, the 8% interest earning on a health savings account is a cherry on the cake. What’s best is that you can withdraw the amount saved in a health account at your convenience and needs. 

However, the flip side of the coin is that it may be difficult for you to follow a disciplined parking fund routine in a health savings account. Also, the flexibility to use the funds for other necessities may lure you into using the amount for other needs like buying a car, etc. 

4) Pay Annually to Avoid Inconsistency

With a regular payment cycle under a health policy, it is easier to afford healthcare security at pocket-friendly rates. For instance, you can cover a family of four members with 2 adults (eldest member=30 years), 2 children (below 5 years) for a sum insured of 10 lakhs for an annual premium of as low as INR 19,200 with the Care Supreme Health Plan.  

Whereas with an HSA, you would need to save at least INR 83,000 every month to maintain a corpus of 10 lakhs towards medical emergencies. 

5) Don’t Miss the Cashless Insurance Advantage

The best part about health insurance is the facility to avail of cashless claim settlement. This means the insurance company directly settles the claim amount with your hospital— saving you from out-of-pocket expenses. This advantage, however, may or may not be available with a health savings account. 

Besides the above-mentioned factors, some features are common between a health cover and a health savings account. For instance– tax benefits. You can avail of tax deductions under both of these security options as per the policy terms. 

Choosing the Right Healthcare Security with Care Health Insurance

Having settled a generous number of 30 lakhs+ claims, you can rely on Care Health Insurance to offer valuable health insurance services. Our health policies promise better healthcare security with benefits like pre and post-hospitalisation cover, various sum-insured options, no-claim bonuses, annual health checks, and more. Our in-house claims team adds to the efficient and hassle-free process of claims settlement across India. So, choose the right medical insurance plan for your family with Care Insurance. 

>> Also Read: Why Should We Buy Health Insurance?

Disclaimer: The information mentioned above is for reference purposes only. Please carefully verify the policy details with the official prospectus and read the terms and conditions.

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