We’ve all heard that medical costs are the number one cause of bankruptcy in the United States.  Based on that simple and well-evidenced fact, many people believe that the best protection against a bankruptcy filing is to acquire health insurance.  If you’re insured, the reasoning goes, you’ll be protected against massive medical bills, which should create a firewall between you and a bankruptcy filing.

That argument makes a great deal of sense at face value and there’s no doubt that having coverage will decrease your risk exposure.  However, if you dig a little deeper, you’ll find that having health insurance won’t necessarily provide adequate protection.  Researchers have uncovered an absolutely shocking fact:  Most of the people who filed medically-related bankruptcies actually had insurance in place!

Undoubtedly, the presence of insurance helps many people from running up truly catastrophic debt levels, but the combined weight of the costs and impacts associated with a serious medical condition often outstrip the value of the insurance.

Job losses, inadequate savings, uncovered expenses, co-payments and other out-of-pocket costs can still push even a relatively well-insured person into financial insolvency.  Don’t get me wrong, health insurance is a good idea and a must-have.  It’s necessary if you want to protect yourself from calamity.  In and of itself, however, it is not sufficient to do the job alone.

So, if health coverage isn’t enough to protect you from illness-related bankruptcy, what else do you need to maintain financial solvency in the face of medical challenges?  Here are a few things that can make a difference.

Quality Health Insurance.  Insurance policies come in all different shapes and sizes.  Having “health insurance” is fine, but what you really need is “good health insurance”.  Evaluate your policy carefully and make sure you have the kind of coverage you need to protect yourself and your assets as much as possible.

Disability Insurance.  If you experience a serious medical problem, it may effect your ability to continue working.  You need to have a way to fill in the gap in income during your recovery.  If your medical situation happens to be chronic, you’ll need a long-term way of taking the sting out of being unable to work.  Consider disability insurance options that can take the place of your paycheck, to at least a large extent, in a worst case scenario.  You cannot reasonably rely on Social Security Disability Insurance to serve this function.  The SSDI application and approval processes are time-consuming and benefits are generally inadequate.

Savings and Investment.  If illness or an emergency medical situation strikes, you are going to need cash.  You’ll need it to cover elements of the medical situation and you’ll need it to help replace lost income.  If you aren’t saving and don’t have resources from which you can draw during a period of crisis, you’re at greater risk.  Make it a priority to build your emergency fund and make sure you have sufficient liquidity in your investments to handle a crisis.

Focus on Prevention.  There are many medical crises that you can’t avoid.  However, many of the illnesses and diseases that put people in dire financial straits are avoidable.  You can prevent an increased likelihood of many debilitating medical conditions by improving your habits and lifestyle.  Smoking?  Quit.  Overweight?  Begin work on healthy eating and exercise.  There a million and one examples.  If you’re doing the right thing for your health, you can decrease your risk of illness.  Those decisions may also put money back into your pocket by lowering health insurance premiums.

When we hear that people file for bankruptcies due to medical problems, we only get part of the story.  The truth is that insurance doesn’t offer absolute protection and that many of those who find themselves in insolvency had their problems exacerbated because they lacked optimal coverage, savings, paycheck replacement plans and may have put themselves at greater risk of illness in the first place.

The idea of going “belly up” due to illness is frightening, but there are things you can do to keep yourself from going straight from the hospital into bankruptcy court.