Diffrence Between Health Saving Account and Health Insurance Plans
Updated On Jan 02, 2024
Owing to changing lifestyles, the risk of health problems like hypertension, diabetes, etc is only increasing. With increased health risks, medical expenses also have witnessed a constant rise so much so that having a safety net like a health insurance plan has become an absolute must. Similar to health insurance plans, there is a Health Savings Account which is a recently introduced product. Want to know more about these healthcare plans? You should know about some differences between Health Savings Accounts and Health Insurance plans.
Table of Contents
What is Health Insurance?
A health insurance is a popular insurance product which is a contract between the policyholder and the insurance company wherein the latter agrees to provide financial compensation in case the former meets a medical emergency. The popularity of health insurance plans has become such that several insurance companies now offer health insurance plans to policyholders from all over. To buy the best plan, you however need to consider several factors such as age, premium amount, policy type, and more. Moreover, the best part about these plans is that you can customize them as per your needs by adding several add-ons to the policy such as critical illness rider, and daily hospital cash, to name a few.
What is a Health Savings Account?
A Health Savings Account or HSA is a type of product that allows individuals to contribute a specific amount of money to stay protected against unforeseen medical events. With a Health Savings Account, you park some money which can be later used against medical expenses and certain other health-related costs. The concept of a Health Savings Account is popular in many foreign countries, however, it is a relatively new concept in India. It is a tax-exempt savings account that can be utilized for qualified medical expenses.
Difference Between Health Insurance and Health Savings Account
Now, that you are familiar with the basic definitions of Health Insurance and Health Savings Account, let’s also walk you through some of the differences between these two mediclaim policy methods:
|
Parameters |
Health Insurance |
Health Savings Account |
|
Function |
Provides financial protection against medical costs |
A tax-advantaged savings account to cover qualified medical expenses |
|
Offered by |
Health insurance companies or employers |
Financial institutions like banks |
|
Controlled by |
Individuals or by employers in case it is sponsored by employers |
Controlled by individuals |
|
Tax implications |
Health insurance premiums are tax-deductible |
Contributions are tax-deductible; interest and gains are tax-free; withdrawals for qualified medical expenses are tax-free |
|
Tenure |
The tenure depends on the type of health insurance plan |
It can be bought as long as health coverage is required |
|
Coverage |
Covers specific healthcare services outlined in the policy |
Used for a wide range of qualified medical expenses, including those not covered by insurance |
|
Minimum coverage |
The minimum sum insured depends on the type of policy |
The minimum balance depends on the financial institution |
|
Expiry |
Specified on the policy term |
There is no specific expiry date |
Choose Between Health Savings Account or Health Insurance Plan
To choose the right health coverage plan for yourself, here are a few factors that you need to consider before buying any medical insurance coverage:
- Identify Your Coverage: First, you need to analyze and check your healthcare needs. If you have dependent family members, you must buy family health insurance plans that provide extensive coverage. Health Savings Accounts on the other hand may not provide as extensive health coverage as compared to health insurance plans.
- Tax Implications: If you are a taxpayer and plan to save on taxes, then you need to check the tax implications. While health insurance provides tax savings on the premiums paid, Health Savings account on the other hand offers tax exemptions on the amount paid as well as interest.
- Money Withdrawal: The premiums paid for health insurance policy cannot be withdrawn later. However, the money paid towards a Health Savings Account can be withdrawn depending on the medical needs.
- Cashless Benefits: With a health insurance plan, you can enjoy cashless benefits. This is because insurers are tied-up with network hospitals that provide the benefits of cashless hospitalisation. However, this may not be the case with Health Savings Accounts.
- Affordability: The premium payment for the health insurance plan as well as the Health Savings Account depends on the affordability of the individual. With a health insurance plan, you choose the health insurance payment as well as the premium payment frequency.
Summing Up
Thus, it depends on you whether you want to buy a Health Insurance plan or a Health Savings Account. It is however important to note that the features of the two can vary based on specific insurance plans and HSA financial institutions, so individuals should carefully review the terms and conditions of their plans. Additionally, many individuals use health insurance and HSAs together to maximize their healthcare coverage and tax advantages.
FAQs
Q. Can I get tax benefits on both my Health Savings Account and Health Insurance Plans?
A. Yes, you can get tax benefits on both a Health Savings Account and a Health Insurance Plan.
Q. What is the policy tenure of a Health Insurance plan?
A. The policy tenure of your health insurance plan is determined by your insurance company.
Q. Can I monitor the coverage offered under the health insurance plan?
A. Yes, you can monitor the coverage offered under a health insurance plan.
