Can your finances handle an unexpected health crisis?

As dollars continue to be stretched thin, many Americans are increasingly concerned about healthcare costs. According to the American Council of Life Insurers’ Financial Resilience Index, 40% of middle-class households worry about affording healthcare services over the next year.

While health insurance can help offset costs, an unexpected illness or injury can cut income or create expensive ongoing care needs that strain household finances and long-term goals. That’s why understanding what your insurance covers, identifying potential gaps and having money set aside for emergencies can help safeguard your finances in a health crisis.

Preparing for an unexpected injury or illness starts with identifying gaps in existing coverage. Reviewing current health insurance policies can help households understand how much they may be responsible for out of pocket after a serious medical event. Deductibles, out-of-pocket maximums, prescription drug coverage and whether preferred healthcare providers are in-network should also be reviewed. Even with comprehensive plans, some services may not be covered.

Depending on their condition, an ill or injured person may need to take extended time off work, which could mean losing part or all of their income. This makes it extremely difficult to cover daily expenses, even when insurance largely covers medical services. However, additional coverage, such as disability insurance, can help replace a portion of that income for someone with a qualifying injury or illness. Some employers may offer short-term or long-term disability coverage as part of the benefits package. You can also purchase policies individually from an insurance company or through an insurance agent.

How will care be paid?

Following a serious illness or injury, some people might need help with daily activities. Whether at home or in a care facility, traditional health insurance typically doesn’t cover most long-term custodial care, so it's important to understand how those expenses would be paid.

While additional coverage can provide a cushion, insurance alone may not be enough to shield a household from the financial hardships that come with a serious illness or injury. It’s also important to set aside savings. Start by building an emergency fund with at least three to six months’ worth of expenses. If possible, setting aside additional money for expenses insurance may not cover can add another layer of protection. You can build additional savings gradually alongside other goals, such as paying down debt or contributing toward retirement.

As life changes, so can financial protection. Reviewing insurance policies, savings, long-term goals and even estate planning documents on an annual basis can help identify gaps and determine whether adjustments are needed. Financial situations should also be reviewed following major life events, including marriage, having children, changing jobs or approaching retirement.

Beyond the emotional toll, an unexpected illness or injury can create significant, lasting financial challenges. While it’s impossible to anticipate every expense, disruption or unexpected medical event, understanding where financial vulnerabilities exist and working with a professional to strengthen protections can help households become better prepared.

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Jason “JB” Beckett has been an advisor for 24 years and is the founder and president of Beckett Financial Group, with offices in West Columbia and Greenville, S.C. Contact him at JB.beckett@innfeedback.com.