Do you need health insurance if you have an emergency fund?

The debate about the uncertainty of life and the need for contingency measures has taken the forefront in the last couple of years. Are your emergency funds enough to cater to the rising healthcare bills, or do you need health insurance to guard yourself against big hospital bills?

This article highlights the importance of health insurance along with emergency funds in mutual funds to take care of unforeseen conditions.

Why do you need health insurance along with your emergency funds?

It was a preconceived notion that old age brings a heavy healthcare bill with itself. But the COVID-19 pandemic that took the world by surprise has made it abundantly clear that anyone can need extensive medical care at any time. With advanced technology, even the diagnosis costs have skyrocketed.

Can your emergency savings funds support you and cover all the medical expenses? And what if you discover a severe health issue and all your savings drained out? It sounds catastrophic, but it is a situation worth considering.

Health insurance can simply guarantee that you are safeguarded against huge hospital bills. At the same time, you can protect your hard-earned savings from being eroded.

Difference between an emergency fund and health insurance

Although the purpose of both is to provide a safety net against contingencies, there is a basic difference between them.

Emergency funds

An emergency fund is used to meet large unforeseen expenses required in emergencies. Here is how you can build an emergency fund to protect yourself and your family from future uncertainties.

  • Regular savings: Making it a habit to save every month plays a huge role in building an emergency fund in mutual funds investment. You should budget your monthly expenses and designate a fixed percentage of your income as forced savings.
  • Save the windfalls: Usually, when people receive windfall gains, they tend to spend it on indulgences. But it is important to use such money for building an emergency corpus. It can give your savings a much-needed boost.
  • Invest the savings: Money that is kept idle loses its value. Hence, it is important to invest your savings in different market instruments as per the fund requirements.

Health insurance

Health insurance is an insurance policy that allows you to claim the expenses of any medical treatment for you and your family from the insurance company against the payment of a premium. This can help you protect your savings from getting diluted. Here are the key benefits of buying a health insurance policy.

  • Hassle-free treatment: Fighting a disease or medical condition can be hard, both mentally and physically. Keeping this in mind, the insurance companies have tie-ups with the best hospitals to provide cashless service to the policyholders.
  • Lower premiums: Due to rising competition, health insurance is available at lower prices. Also, if you buy health insurance at a younger age, you have to pay much less premium due to less risk of being medically unfit.
  • Free health check-up: The policyholders can get a full-body check-up every year at any empaneled hospital for free.
  • Tax benefits: The premiums paid by you for your and your family’s health policies is eligible for a tax deduction under section 80D of the Income Tax Act, 1961.
  • No claim bonus: Some insurers also provide a bonus on the policy value for every year when you do not claim any medical expenses.

It is equally important to purchase a health insurance policy along with keeping robust emergency funds. Both together can help protect you against life’s uncertainties.

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