Insurance and HSAs at a glance

The types of insurance worth having, term vs. whole life, and the triple tax advantage of HSAs.

Different Types

Insurance is a crucial part of financial planning, providing a safety net for unexpected events that could otherwise cause significant financial strain. There are several types of insurance to consider, each serving different purposes:

1. Health insurance covers medical costs, ensuring you can afford necessary healthcare.
2. Disability insurance provides income protection in case you’re unable to work due to a disability.
3. Auto insurance covers costs related to vehicle accidents or damages.
4. Life insurance provides financial support to your dependents in the event of your death. There are two primary types: term life and permanent life insurance.

• Term life insurance is recommended for most individuals. It covers a specified term, typically 20-30 years, and has no cash value. To get a quote for term life insurance, you can visit websites like Term4Sale
• Permanent life insurance lasts your entire lifetime and has a cash value component. One form of permanent life insurance, Whole Life, is often more expensive due to high premiums and fees. It can also be difficult to determine what portion of your payments is used for the insurance and what accumulates as cash value. A common recommendation is to buy term insurance and invest the difference, as this often results in a better financial outcome.
• Renters/Homeowners insurance covers losses or damages to your home and personal belongings.
• Umbrella insurance provides additional liability coverage beyond the limits of your other insurance policies.

If you’re interested in learning more about whole life insurance, there are numerous resources available. A good starting point is the White Coat Investor’s series debunking the myths of whole life insurance, which provides a comprehensive breakdown of this complex product.

Health Savings Accounts

A Health Savings Account (HSA) is a tax-advantaged account designed to help individuals or families covered under high-deductible health plans save for qualified medical expenses.

In terms of contribution limits, for 2026 you can contribute up to $4,400 for an individual and $8,750 for a family; the IRS adjusts these limits each year. These contributions are pre-tax, reducing your taxable income for the year.

One of the primary benefits of an HSA is its triple tax advantage:

• Contributions reduce your taxable income.
• The money in the account grows tax-free.
• Withdrawals for qualified medical expenses are also tax-free.

This makes HSAs a highly effective tool for managing healthcare costs. Additionally, after the age of 65, you can use the money in the HSA like a retirement account. You could pay for medical expenses out of pocket, save the receipts, and then reimburse yourself in retirement.

A tip to consider: HSAs can be particularly beneficial when you’re young and without significant health conditions, as you’re likely to have fewer medical expenses and can let the money in the account grow. Also, most employers contribute to your HSA, which can further boost your savings.