Medical costs are a primary reason for bankruptcy in the United States, even if you hold health insurance. One way to protect yourself against unexpected medical costs is by setting up a health savings account alongside your health plan. Not all health plans are eligible for a health savings account, however.

Generally, the only plans that work with HSAs are high deductible plans, sometimes called catastrophic health insurance. These plans have deductibles over $5,000 and are intended to defray costs related to major hospitalization. The monthly premiums are quite low, making this an affordable option for the younger demographic who doesn’t have ongoing medical needs.

After purchasing a compatible plan, you set up a health savings account through a financial institution. You deposit money into this account as you would a typical savings account, but you do not pay tax on this income as long as it’s used for medical expenses. This tax advantaged account helps you save for your medical expenses, while not carrying around more of a health insurance plan than you need.

Sometimes your employer may offer a health savings account directly, saving you the need of setting up your own through a bank. While the employer may set it up for you, you own the account and have complete control over the money going in and out. It’s a good system for putting your medical money in a place you can easily get to it, without being tempted by it in your actual bank account.

Don’t get caught flat footed by medical bills that come out of nowhere. Contact your local independent agent in Albany, NY to get an eligible health insurance plan to pair up with a health savings account.