Going it alone

If you don't have adequate medical coverage through your employer or another group, you need to consider other options. Individual coverage is most likely less comprehensive and more expensive than group coverage. But it's still essential.

To get coverage, you can either work with an independent agent in your community or find an agent through the National Association of Health Underwriters (NAHU). The Foundation for Health Coverage Education (FHCE) is also a helpful resource for finding health coverage in your area.

Things to look for in your policy

• Non-cancelable, guaranteed renewable coverage—This will protect you from cancellation if you pay your premiums on time and don't defraud the insurance company. Unfortunately, there are too many companies that have a history of canceling (or not renewing) your policy once you become sick. Protect yourself.
• A 10-day rescission period—This gives you 10 days to examine the policy carefully before you decide to keep the coverage. If you change your mind within the 10 days, you will get your money back.

Also make sure that you clearly understand what the policy does and doesn't cover. This can be especially important if you have an existing medical condition. Many policies exclude or restrict coverage of pre-existing conditions, so be sure you understand your coverage. Always read the fine print.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) limits the ability of group health plans to exclude you because of a pre-existing condition. This only applies, however, if you have had continuous medical coverage with a break of no more than 63 days.

High-deductible plans

If the cost of comprehensive care is prohibitive, you can also consider a high-deductible policy to cover major expenses. Also known as catastrophic insurance, this type of plan will allow you to pay a lower monthly premium in exchange for a higher deductible. Although there are variations among plans, in general you'll pay all of your expenses out-of-pocket until you reach your deductible.

Health savings accounts

Another benefit of a high-deductible plan is that you're most likely eligible for a tax-deductible health savings account (HSA). The U.S. Treasury provides a detailed description of how HSAs work, but in general:

• An HSA provides you with tax savings in three ways: Your monthly contributions are tax-deductible, your investment earnings are federal income tax-free, and you can make tax-free withdrawals for qualified medical expenses.
• In 2009, your deductible must be at least $1,150/year for an individual or $2,300/year for a family to be eligible.
• In 2009, the maximum you can contribute to an HSA is $3,000 for an individual or $5,950 for a family. If you are 55 or older, you can contribute an additional $1,000/year.
• Unlike the more familiar flexible spending accounts, you don't have to "spend down" your HSA account each year. You can continue to save year over year and invest the money for future needs.

A couple of caveats:

• Once you enroll in Medicare, you can no longer contribute to an HSA. However, you can continue to use the funds you've accumulated.
• If you use the funds for anything other than qualified medical expenses before you turn 65, you'll pay a 10 percent penalty.

Make sure that your policy provides a minimum of $1 million of lifetime coverage. This may sound like a lot, but you'd be surprised how quickly costs can pile up when you have a serious illness or injury.