In the blink of an eye, you can end up hundreds of thousands of dollars in debt.

It doesn’t matter how careful you are in your budgeting or how disciplined you are in your spending — without health insurance, you’re always living one disaster away from financial ruin. And even medical treatment that doesn’t seem like a big deal can be very costly. Doctors and hospitals charge some of the highest hourly rates for service of any industry in the country. Without health insurance, even a routine event like a broken bone or childbirth can set you back thousands of dollars.

In this series “Understanding Insurance,” we’ve been working to make sense of the complicated and confusing insurance industry. We’ve talked about how insurance protects us from the fundamental risks of life, and looked at ways to mitigate the risk factors that can cost us money. Last time, we studied some of the important ideas that make a difference in our insurance policies. Today, we’re going to dig a little deeper into the most fundamental type of insurance that everyone should have: health insurance.

There’s been a lot of talk about health insurance in the United States in recent years. It’s a highly controversial issue. Much of the problem comes from the fact that medical care is so astronomically expensive, and that most people can’t afford to pay out of pocket for even basic medical care. Health insurance helps to make medical care affordable, but the insurance itself can cost an arm and a leg. Because of this, many people don’t carry enough health insurance.

There are some politically active people who would like to see the government provide free or nearly-free health insurance to every American (similar to the system that exists in Canada and many other places). That idea proved politically unpalatable to Americans in the 1990s, but several years ago, Congress and the Obama administration passed legislation that is aimed at making health insurance more available and affordable to the people who have previously lived without it. The unpleasant side affect is that the system is making health insurance much, much more expensive for existing customers… but that’s a different conversation for a different day.

The important thing is this: Since we don’t live in a society that offers universal health care coverage, each of us is responsible for paying any of the medical bills that we incur for ourselves or our families. Those bills can pile up into four, five or even six-digit figures unless we have the proper protection from risk.

The tricky thing about medical risk is that so much of our medical fate is outside of our control. We can try to maintain healthy lifestyles to keep ourselves out of the doctor’s office, but there are plenty of catastrophes waiting in the world that can send you or a family member into the hospital unexpectedly. You can think of a hospital as the world’s most expensive hotel — each night you stay there can cost you thousands of dollars. If you have some unfortunate accident or health emergency that requires surgery or other extended care, you can easily incur hundreds of thousands of dollars worth of bills for treatment.

Obviously, very few people can afford to pay for expensive medical treatment outright. That’s why health insurance is so important: when you carry good health insurance, your insurance company covers a large portion of your medical care. Although health insurance won’t save you a ton of money when you go the doctor for a regular check-up, it can spare you from enormous debt if you end up in the hospital.

Traditionally, employers have provided health insurance for their employees as part of their benefits package. There was a day when employers even paid to cover their employees’ family members.  And while some companies may still do that, those days are largely behind us. Today, some employers don’t offer health insurance at all; many of those that do require employees to pay a large part of the premiums on their policies. And most companies today only offer complete coverage of the employees themselves — if you want to add family members to your company policy you can, but you’ll have to pay their entire premiums out of your  own pocket.

There’s no telling how much longer we can count on the employment system to provide health insurance, and the Obama legislation is making health insurance even more expensive for companies. And if you don’t happen to get health coverage through your job, you’re going to have to come up with insurance on your own. There are plenty of companies out there that offer individual insurance policies on the open market. I won’t lie to you: Most of those policies are very expensive. You may think that you can’t afford them; what you really can’t afford, however, is to live without insurance altogether.

There are a number of factors that affect the price you’ll pay for private insurance. If you’re a young woman of childbearing age, it’s going to be much more expensive to insure you than to insure a man of the same age, because chances are good that you’ll incur some costs for maternity care while you’re on the policy. If you’re shopping for insurance on your own, be sure to look for plans that offer a “maternity rider,” because some insurance plans won’t pay for the costs of childbirth.

If you’re buying insurance on your own, you’re going to have to balance your premium and deductibles. Great insurance policies that have very low deductibles and high coverage also come with big premiums — they’re very expensive. On the other had, the most affordable health insurance plans will often have large deductibles — sometimes up to $5,000 — and also require you to pay 20% or more of any major medical expenses. If you have a large emergency fund, a cheaper plan like this might be a good  way to go. If you haven’t done much saving, you may need to buy a more expensive plan with a lower deductible until you’ve saved enough to protect you from big medical expenses.

Medical care can be one of the biggest expenses in life, and it’s likely that health insurance will be one  of your biggest monthly expenses. And though it bites to write that check every month, it stings much more to amass $100,000 in debt over an unexpected hospital stay. Going without health insurance is one of the riskiest things you can do in your financial life. So do the right thing for yourself and your family, and find an insurance policy that can protect you from financial disaster.

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Photo by Images of Money. Used under Creative Commons License.