Savings Account for Medical Expenses: Staying Prepared for Health Emergencies

When it comes to our health, we all want the best care possible. However, rising healthcare costs, have impacted millions of families in India. In fact, the country experienced a medical inflation rate of 14% in 2021, the highest among Asian nations. Today, having a health insurance policy may not be enough to cover burgeoning medical costs. Simultaneously, you may have to open a dedicated Savings Account for medical emergencies.

In this blog, we have deep dived into the importance opening a Savings Accounts for medical emergencies.

India’s Unique Challenges with Health Insurance Plans

Though , having a personal or family health insurance policy is an absolute must, there's still a lot of gap in terms of market penetration. A study by Policybazaar, titled 'How India Buys Insurance,' highlights the primary reasons why health insurance remains unpopular in India. Affordability and the complexity of insurance products are the two biggest hurdles.
 

• Over 40% of respondents in a Policybazaar study identified high premiums as a barrier to purchasing health and life insurance.
• Approximately 53% of survey participants found the intricacies of insurance products and processes challenging to understand.
• Despite high awareness (93%), only 43% of respondents had an active health insurance policy.
• A considerable portion (19%) of respondents lacked understanding of how health insurance policies function.

Introducing Savings Account for Medical Expenses

Similar to Health Savings Accounts (HSAs) in the United States, savings accounts for medical expenses are designed specifically to build corpus during medical emergencies. In India, health savings accounts are still relatively new, with only a few entities providing such services.

Let’s take a look at the key features:

• These accounts function like regular savings accounts, allowing users to deposit money and earn interest on their savings.
• Such accounts may offer better interest rates than regular savings accounts and can be combined with health insurance plans.
• The funds in these accounts can be used to cover a wide range of health-related expenses that may not be fully covered by health insurance plans.
• Customers can withdraw money from their HSA at any time for health-related expenses, and the account may also provide tax deductions and tax-free interest. 

Differences Between Health Savings Account and Health Insurance Plans

Disclaimer: The table is for educational purposes only. Ujjivan SFB doesn't endorse any such products.

Savings Account for Medical Expenses: The Need of the Hour

Given the rising healthcare costs and the barriers to obtaining health insurance, Health Savings Accounts (HSAs) present a practical and effective solution for many Indians. It addresses the affordability and complexity issues associated with health insurance

By providing a flexible, tax-advantaged way to save and pay for medical expenses, HSAs can bridge the gap left by traditional health insurance plans. As more people become aware of the benefits of having a dedicated savings account for medical expenses, such accounts could play a significant role in improving financial preparedness for healthcare needs in India.

How to Maximise Your Regular Savings Account For Medical Expenses

Since not many banks in India offer Savings Account for medical expenses yet, here are some tips to maximise your Regular Savings Account:

1. Open a Savings Account for Medical Emergencies

You can open a Savings Account separately to take care of medical expenses. You can link your account to a salary account or set aside a certain corpus every month just for medical emergencies.

2. Set-up Automatic Deposits

To ensure consistent savings, set up automatic deposits from your primary bank account to your Savings Account. This way, a fixed amount will be transferred regularly without you having to remember.

3. Track Your Medical Expenses

Keep a record of your medical expenses, including bills, receipts, and insurance claim details. This will help you track how much you spend on healthcare and make informed decisions about your savings goals.

4. Regularly Review and Adjust Your Savings Goals

Periodically review your saving fund's progress and adjust your goals based on changing circumstances and healthcare needs. Consider factors such as inflation rates and changes in personal income.

Regular Savings Account vs. Health Savings Account