Certified Financial Consultant (CFC) Practice Exam

What is the main function of a Health Savings Account?

1. Provide a retirement plan

2. Cover long-term care expenses

3. Save for qualified medical expenses

4. Assist in paying for life insurance premiums

The correct answer is: Save for qualified medical expenses

The primary function of a Health Savings Account (HSA) is to save for qualified medical expenses. HSAs are tax-advantaged accounts designed specifically to help individuals set aside money to pay for eligible healthcare costs, reducing their overall financial burden associated with medical care. Contributions to an HSA are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. This triple tax advantage makes HSAs a valuable tool for managing healthcare expenses, especially for those with high-deductible health plans. While other options may involve financial planning or health-related expenses, they do not align with the specific purpose or benefits associated with Health Savings Accounts. For example, retirement plans focus on long-term savings for retirement, long-term care expenses relate to a different type of insurance or savings plan, and life insurance premiums are unrelated to the intent of HSAs. Thus, the correct answer highlights the primary role of an HSA effectively.