Credit: Istockphoto

IstockphotoFrom Health magazine
Its a fact of life: Everyone gets sick at times. The scary thing is that illness or medical bills cause nearly two-thirds of all bankruptcies, according to a study from Harvard Medical School. And in 78 percent of cases, the person goes bankrupt despite having health insurance. “Typically, it was a relatively brief illness that led to bankruptcy,” says study co-author David U. Himmelstein, MD, associate professor of medicine at Harvard Medical School. Heres how to protect yourself.

While youre well …
Never let your policy lapse.
Its tempting to forgo insurance premium payments if youre jobless. But “not having insurance is as risky as not wearing your seat belt,” warns Atlanta financial planner Mary Claire Allvine, co-author of The 7 Most Important Money Decisions Youll Ever Make. “It takes only one accident or illness to financially ruin you.” Thankfully, the federal government will, in most cases, pay 65 percent of your COBRA bill for nine months if youre laid off this year.

Budget for health care like you do for gas.
Factor your annual deductible, doctor-visit fees, and drug co-pays into your budget, Allvine says. Divide what you pay in a typical year by 12 to see what to save monthly. And use your employers flexible-spending benefit, so you can pay for uncovered medical expenses with pretax dollars.

Get to know your policy.
Youre more likely to get claims covered when you strictly follow your insurers requirements, says Erin Moaratty, chief special-projects officer at the nonprofit Patient Advocate Foundation in Newport News, Virginia. Read your policy thoroughly to see what the rules are for seeing out-of-network doctors, getting preapproval for procedures, etc.

Next Page: Check your disability coverage [ pagebreak ]

Check your disability coverage.
Find out if you have this important insurance from your employer (most offer it). Even if you do, many companies pay only 60 percent of your salary should you become unable to go back to work, so consider getting a supplemental policy that makes up the other 40 percent. Compare quotes from different companies at

View healthy living as a money matter.
See a doctor even for small issues to avoid bigger, costly problems down the line. Eating right, exercising, and quitting smoking are also smart ways to save.

If youre already in health-related financial trouble …
Dont take “no” from your insurer.
“Appeal every claim that is denied,” Moaratty advises. “In our experience, a majority of denials are eventually overturned.” In some cases, fixing a simple coding error (via a quick call from your doctor) will do it. If that doesnt work, craft a written appeal with care, working with your MD and following the timetable spelled out in your policy. This is important not only because it can help you win, but also because, if you dont appeal and later want to sue in court, youll be limited to arguments you raised in your appeals.

Enlist an ally.
Consider hiring a medical advocate who knows the ropes, so you dont have to battle your insurance companys or hospitals billing office alone. Fees vary, but start your research at the Medical Billings Advocate of Americas Web site. For free guidance, go to the Patient Advocate Foundations site.

Negotiate with your doctor and hospital.
If you get a huge bill, ask for the billing or finance department (not your doc) and tell them what you can afford. Most will slash fees for the promise of a speedy payment or set up a payment plan. “The best time to do this is early in the process, “ Moaratty explains. “Once it goes to a collection agency, youll have fewer options.”

Get cash to pay your medical expenses.
Many charities and organizations offer financial aid to those who can't pay their health-related bills. Click here for a sampling of companies, hospitals, and non-profits that can help you cut your costs.