When it comes to unexpected medical costs, you should have enough money to cover the next three to six months — here’s how to get started saving by PaydayNow!

  • In addition to purchasing health insurance, it is critical to put aside funds for unexpected medical expenses.
  • Three to six months’ worth of living expenditures should be saved.
  • With insurance, it’s a good idea to have an emergency fund to cover your deductible.

In 2019, 22% of individuals had an unanticipated severe medical emergency, with costs ranging from $1,000 to $1,999, according to the Federal Reserve Board.

Moreover, according to a CDC research, the average medical bill for a fatal injury victim in an emergency room is $6,880, and the average hospital bill is $41,570.

You never know when you’re going to have an emergency medical crisis, and it’s crucial to have money put aside to meet such expenditures,” Merjen Novosel, a financial expert at PaydayNow

Some of the topics covered here are what to do if you don’t have an emergency fund and how to save for medical crises.

How much money should you save aside in case of unexpected medical bills?

Emergency funds should be sufficient to cover all of your living costs for three to six months; however, $1000 is a good beginning point, and it may be increased progressively over time.

Whether you have individual or family health insurance, experts suggest that you save the same amount as your out-of-pocket limit for unexpected medical bills. In 2021, your out-of-pocket maximum will not exceed $8,550 for people and $17,100 for families if your health plan is compliant with the Affordable Care Act (ACA).

“Out-of-pocket maximum” refers to the most you’ll have to spend on out-of-pocket medical expenses before your insurance kicks in to cover everything else. Copayments, deductibles, and coinsurance are often included in this sum, although the specifics of each plan vary. If you have to pay for prescription drugs out of pocket, they may or may not be covered by your plan. If you have a monthly payment for insurance or “premiums,” keep in mind that your out-of-pocket limit does not include these payments.

According to Novosel, you should have a contingency fund of at least four times your annual out-of-pocket limit, or $4,000, set up in an emergency medical need.

According to Ken Waltzer, MD, MPH, a certified financial planner and co-founder and managing partner of KCS Wealth Advisory, “each person should look at their health plan and consider their health status and healthcare preferences to get an idea of what kind of expenses they might incur,” he says. “

Your medical insurance may not cover all of your expenditures if you obtain treatment from out-of-network doctors or utilize services that aren’t covered by your plan, so you’ll need a larger emergency fund in case anything happens. Even if you strive to remain inside your insurance network, you may get unexpected fees from subcontracted providers or for emergency treatment.

A healthcare provider is termed an “in-network provider” if they have an agreement with your insurance company to receive compensation without further billing to members, regardless of their prices. As an “out-of-network supplier,” they may charge whatever they want, even if there is no agreement to prevent them from doing so.

Novosel says that you should aim higher if you have a chronic illness since your maximum out-of-pocket costs are more likely to exceed due to continued treatment.

What kind of account should you use for your medical emergency fund?

“Don’t put it in an account that fluctuates in value or has the potential for default. As a result, an FDIC-insured, high-yielding savings account makes the most incredible sense, “Waltzer thinks. The national average interest rate on savings accounts is about 0.05 percent.

savings accounts with high rates of return

The higher interest rate of roughly 0.40 to 0.60 percent.

When a bank collapses, your money is secure with the Federal Deposit Insurance Corporation (FDIC), a federal institution in the United States that insures deposits against loss or fraud.

The money you contribute to a Health Savings Account (HSA) is tax-deductible, and the money you withdraw for approved medical costs is tax-free, according to Novosel. Those above the age of 55 may give additional cash.

People who have a High Deductible Health Plan (HDHP) may open a Health Savings Account (HSA) (HDHP). Health care plans may be checked for “HSA-eligibility” while evaluating them.

According to Novosel, saving for an emergency fund might be challenging if you don’t earn a lot of money. However, even if you start saving as little as $5 a week, it builds up over time.

In the event of an emergency, what will you do?

Without a medical emergency fund, you may be forced to use credit cards or loans and money from other accounts, such as education or retirement savings.

25% of people in 2019 didn’t go to the doctor because they couldn’t afford it. Fortunately, there are various ways to alleviate the burden of medical debt, such as:

  • Verify the invoice for mistakes. Your doctor’s billing manager, the hospital, and the insurance provider should be notified of anomalies in your itemized invoices. A new, more accurate bill is possible if you challenge the charges. Get the information you need, not just an estimate of how much you owe.
  • Your healthcare provider’s billing department may help you negotiate a lower cost. Most hospitals provide free or low-cost medical care to those who can’t afford to pay for it. To prove eligibility, income documents are required.
  • Pay attention to the conditions of payment and try to work something out. Talk to your lender about payment arrangements, such as extending the due date, getting a discount for paying early, or agreeing to a zero-interest payment plan if you can’t decrease your monthly payment.
  • Consider applying for Medicaid if you are a low-income individual. Medicaid is a combined federal and state program that helps low-income persons with medical expenses. Each state administers it differently. You may acquire additional information and discover whether you qualify for Medicaid by visiting the federal or your state’s Medicaid website.
  • Contact an advocate about medical bills. Are you overwhelmed by the entire process? Consider hiring a medical billing advocate. Advocates can examine your account to find inaccuracies, negotiate a lesser payment to settle your bill, and follow up with the insurance carrier to verify that you are fully covered. You can count on them to do all to keep your medical expenses as low as possible. Generally, attorneys are compensated either by the hour or by a percentage of the money they save you in litigation costs and fees.

Households can’t develop an emergency fund just by improving their financial literacy. Individuals should seek financial counseling to improve economic confidence, uncover strategies to minimize spending, optimize the use of existing resources, and enhance their income.


Your savings goal should be equivalent to the maximum out-of-pocket payments of your health insurance policy. A high-interest savings account is the most excellent place to keep your emergency money, but you don’t have to segregate it from your other savings.

You may be obliged to take out loans, dip into long-term savings, or get into debt in the absence of emergency money. Financial assistance is available in monthly payment plans and medical debt settlement services.

Waltzer recommends seeing a health insurance broker or a financial advisor to help you figure out how much money you should be saving for medical expenses.

You may also take the Consumer Financial Protection Bureau’s (CFPB) quiz when it comes to your financial health.


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