Life throws us all curveballs, so it’s wise to be prepared for worst-case scenarios. Unfortunately, that’s easier said than done when it comes to finances. Many of us have basic protections in place, such as homeowners insurance and savings funds (hopefully), but are you set up to survive and thrive in the case of unexpected illness? Here are some considerations to help you better prepare for managing your finances around unexpected illness. 

Have a Solid Emergency Fund

We’ve said it before, and experts all agree: Everyone needs an emergency fund. This should be a separate account in which you save between three and six months’ worth of expenses to cover sudden costs, such as a car accident or illness that prevents you from working. (Nerdwallet even offers a nifty Emergency Fund Calculator.) And we know you probably know this already, but your retirement savings is not emergency savings. 

Bankrate’s annual Emergency Savings Report found that despite reporting more debt, many Americans are actively working to improve their emergency savings in 2024. Around 44% of us could pay an emergency expense of $1,000 or more from savings. (This is better than the last time we commented on these statistics, when it was around 41% in 2020.) That leaves 46% of us who would need to borrow money in an emergency, whether it’s from a credit card, a loan, or from family and friends.

Options if You’re Still in the Workforce

If you’re still working, you have a few options regarding planning for an unexpected illness or injury. Disability insurance will replace your income if you can’t work, and there are both short- and long-term options in which you can invest. Typically, disability insurance should cover around 60% of your income. (More information here.) A lot of employers offer a small disability deal as part of your overall benefits, so be sure to look into that if you don’t know about it already. Retirement protection insurance allows you to continue saving for retirement even if you’re too sick or hurt to work. Just like many insurance policies, you make scheduled premium payments. Then, if you find yourself unable to continue working, your policy makes monthly deposits in a trust. If you don’t experience illness/injury and are able to continue working until retirement, the money in the trust gets paid out to you in monthly installments once you reach age 65 or 67.

While many employees can be covered for long-term leave under the Family and Medical Leave Act (FMLA), that doesn’t guarantee you’ll get paid for time missed. (It only protects your job and access to employment-sponsored health insurance.) Additionally, FMLA is typically used for extended absences, is only available from certain employers and requires a ton of paperwork. But what about short-term medical leave? Those laws vary from state to state, with New York state law only covering up to 40 hours unpaid. (Another great reason to have an emergency fund.)

Options if You’re Retired

When you’re acutely ill, the last thing you want to think about is finances. However, if you can focus on just a few tasks now, you can avoid digging yourself into a financial hole. 

First, prioritize your most pressing bills. Credit cards are notoriously unforgiving with late payments, so those often come first. The same is true with car loans and rent or mortgage payments. Household expenses are important, but there you have a bit more leeway: Utilities don’t report to the credit bureaus unless they’ve gone into collections, which only happens after you’ve missed several payments. Before you let it get that far, though, contact your service providers to see if they offer hardship options (most do.) If things are going to be that tight, you should also consider canceling some cable/internet subscriptions that you could live without for a few months.

As for those medical bills, though, you can safely set them aside — at least for the time being. One reason is that they’re negotiable. When you’re better, do some research on fair and reasonable rates for a procedure by checking websites like HealthcareBluebook or the Medicare/Medicaid provider database, which tracks procedure prices across the country. Then call your health insurance provider and the hospital to try and negotiate a lower bill.

Top image by PixelsEffect from Getty Images Signature, via

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