In the United States, almost 40 million people are hospitalized every year, according to the Health Cost Utilization Project. The number of uninsured hospital stays has grown by 42% between 1997 and 2009, the last year for which statistics are available.

If you get sick and require medical care, either in or out of the hospital, you may run into several consequences, even if you have a gold-plated healthcare plan. Here are four situations you should expect and plan for in case you develop an illness. (For related reading, see Fighting The High Costs Of Healthcare.)

1. Health Insurance Coverage

The impact of an illness on your health insurance coverage depends on both the illness and the provider. Your coverage may or may not extend to the illness you have and your coverage may be capped or limited, leaving you exposed to paying out of your pocket. The real challenge comes if you are diagnosed with a chronic illness, such as diabetes or asthma. Health insurance companies can change the terms of their policies on an annual basis and you may find that they will no longer cover you for your existing illness.

If you don't currently have health insurance, you may have difficulties being accepted for a policy at all. If you do get one, your rates are likely to be significantly higher than average. Proposed legislation will preclude insurance companies from dropping coverage in the event of illness, but it is still a very real threat currently.

2. Co-Pays and Deductibles

The vast majority of health insurance policies include required co-pays and deductibles that can eat into your savings. Co-pays represent the portion of medical costs that you must pay in order for the insurance company to pay the rest. For example, your policy may have a co-pay of 20%, meaning that you have to pay $200 of a $1,000 medical bill and the insurance company will pay the remaining $800. Deductibles are the amounts you have to pay before any of the insurance kicks in.

For example, a policy may state that you have to incur (and pay for) $3,000 of medical costs before the co-pay split kicks in. You can plan ahead of time for the deductible, as it is a known dollar amount. The co-pay can be unlimited so, if you have a serious illness or have been in an accident, you could be out of pocket thousands or tens of thousands of dollars. (To learn more, check out Buying Private Health Insurance.)

3. Tiered Levels of Care

Each health insurance policy has its own rules about what procedures it will and will not pay for. As medical knowledge expands and new treatments become available, often health insurance lags behind. If you become ill, you may be faced with the decision of accepting an older (and perhaps less effective) treatment that your insurance company has approved, or paying out of pocket for a newer solution. If you are diagnosed with a progressive disease like cancer, where immediate treatment can improve the prognosis, you may be pressured to make a difficult monetary decision about your health.

4. Dropped Life Insurance Coverage

Even after you recover from an illness, you may still encounter insurance troubles. Some illnesses are considered by life insurance companies to be markers for further illness and the chance of death. For example, a seizure could indicate further seizures or epileptic events in the future, which puts you at higher risk for death.

Life insurance companies guarantee coverage for a set period of time, however, they have no requirements to renew your coverage. You may find yourself unable to secure new life insurance, thereby putting your financial and estate planning at risk. (For additional reading, see 5 Life Insurance Questions You Should Ask.)

The Bottom Line
Becoming ill could be one of the most financially impactful events in your life. Take some time to review your health and life coverage while you are still healthy to ensure that you understand the potential financial consequences of sickness. In particular, make certain that you have access to available funds to cover deductibles. Work with a financial planner or CPA to ensure that you have the coverage you need. (To help you determine if you have enough coverage, read How Much Life Insurance Should You Carry?)

Related Articles
  1. Stock Analysis

    How Does Oscar Work and Make Money?

    Learn how startup Oscar is taking on the health insurance giants by offering customers free doctor's visits, generic drugs and 24-hour phone access to doctors.
  2. Retirement

    The Better Way to Save: Life Insurance or IRA?

    Sure, you can tap your permanent life insurance policy to help fund your retirement. But in most cases, an IRA is the better choice. Here's why.
  3. Insurance

    Life vs. Health Insurance: Choosing What to Buy

    When you only buy the coverage you truly need, the debate over medical insurance vs. life insurance might just be one you can avoid.
  4. Insurance

    The 5 Biggest Russian Insurance Companies

    Discover the five companies that dominate the Russian insurance market, and learn a little more about their business operations and ownership.
  5. Insurance

    Life Insurance & Annuities: Sound Investments?

    There are certain scenarios in which investing in insurance is a savvy move. But expect a big chunk of your money to go toward fees.
  6. Professionals

    How to Help Clients Navigate Open Enrollment

    With companies trying to pass on more costs to employees, making the right choices during open enrollment is more important than ever.
  7. Insurance

    Biggest Life Insurance Companies in the US

    Read about the top life insurance companies in the United States as measured by written premiums and learn a little more about their business operations.
  8. Investing

    Why to Buy Term Life Insurance with a Conversion Option

    Why you should always purchase a term life insurance policy that allows for an unrestricted conversion option.
  9. Investing

    How Will E-Cigarettes Affect Big Tobacco?

    E-cigarettes have emerged as a threat to cigarette makers. Will they be able to ward off this threat?
  10. Insurance

    All About Impaired Risk Annuites and Insurance

    What are impaired risk insurance products and understanding life insurance rate classes, table ratings and flat extra premiums.
  1. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  2. Are Cafeteria plans exempt from Social Security?

    Typically, qualified benefits offered through cafeteria plans are exempt from Social Security taxes. However, certain types ... Read Full Answer >>
  3. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>
  4. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  5. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  6. Can your life insurance company sue you?

    A life insurance company generally cannot sue you, but it can sue your estate. The company may do this in order to recover ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!