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To deal with unexpected expenses arising from illnesses, people often either buy health insurance or create a medical emergency fund. Both are aimed at protecting you and your family from financial shocks in case of a sudden medical emergency. Many people have doubts about which of the two options would be right to choose. Let us know whether it is right for you to take health insurance or creating a medical emergency fund is beneficial.
Medical Emergency Fund
How much should the fund be?
A medical emergency fund is money you set aside for unexpected medical expenses. It works like a protective shield. You can keep this money in a high interest rate savings account or liquid mutual fund, so that it is easily available when needed. Now when it comes to how much money should be there, experts say that Rs 50,000 to Rs 1 lakh should be deposited for each member.
advantages and disadvantages
What are the benefits of Medical Emergency Fund?
With a Medical Emergency Fund, you get instant cash and there is no need for any claims or paperwork. It can be used for expenses that are not covered by insurance. While it has advantages, it also has some disadvantages. If the medical bills are very high, your saved fund may be exhausted. Apart from this, it takes time to save enough money. There is no tax exemption on this either.
What is health insurance?
Health insurance companies provide health insurance for an annual premium fee. In return, your medical expenses are paid up to a certain limit. This includes hospitalization, surgery, day care treatment, ambulance charges and sometimes even pre- and post-hospitalization expenses. Now it comes to the question of how much plan is right to take, then for a family of 4 members, it is best to get an insurance of Rs 10 lakh.
advantages and disadvantages
These are the advantages and disadvantages of insurance
By getting insured, you get comprehensive coverage at a low annual premium and your savings do not go away. It covers bills of Rs 5 lakh or more depending on the sum insured. In this, tax exemption is also available on premium under 80D. Talking about the shortcomings, there is a waiting period for some diseases, due to which you may have to wait for treatment. Claim processing takes time.
Which one to choose from both?
Insurance is the first line of defense in a medical emergency. It covers huge hospital bills, which can drain your emergency fund. Medical emergency fund, on the other hand, is your backup. It helps you pay for minor medical expenses that do not require hospitalization or expenses that are not covered by insurance. Therefore, experts say it is more beneficial to have both the options.
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