Don't Quit Your Health Insurance

Quitting a job can elevate you to new heights in your career. To keep from paying the price, however, you need to make sure you bring your health insurance with you.

People quit their jobs for a variety of reasons. You may already have a new job lined up that offers better pay, more benefits, or a more natural fit to your skills and talents. On the other hand, if you're not lucky enough to work at an employer that offers paid sabbaticals, like American Express or Nike, then you may simply decide that you need to take some time for yourself. No matter why you decide to leave your job, you'll want to keep yourself covered.

It's a big deal
There's no bigger threat to your financial well-being than being without health insurance. If you're uninsured, all it takes is one serious illness or accident to eat up a lifetime of savings. Even a short trip to the hospital can produce a five-figure medical bill, and anything requiring more complicated procedures can hit you for $100,000 or more in short order. Unless you're Warren Buffett, you probably don't have an emergency fund that big.

On the other hand, staying insured isn't cheap either. If your employer has covered most or all of the cost of your health insurance premiums, you'll probably be shocked at how expensive insurance coverage is. You may even have difficulty finding new coverage at all.

Know your options
Luckily, you have a number of legal rights when you quit your job. Under the COBRA laws, you're entitled to remain a member of your old employer's plan for up to 18 months after you leave employment. Your employer may not discriminate against you in providing coverage; you must get the same type of coverage you had as an employee. The only catch is that you'll have to shoulder the entire cost of coverage by yourself.

If you're going to be unemployed for a while, you should strongly consider using COBRA to remain insured under your old employer's plan. However, you should also check whether individual health insurance coverage is cheaper, especially if COBRA coverage is particularly expensive. You have 60 days to decide whether to make a COBRA election, so you have some time to look at alternatives to find the one that makes the most sense for you. Don't let your employer pressure you into making a decision immediately -- the law gives you that 60-day period. If you decide to take COBRA coverage, you'll have to pay premiums retroactively to the date your employee coverage ended.

New coverage or old
On the other hand, if you're starting another job with benefits shortly after quitting, then you may be able to move from your old insurance to your new insurance without a glitch. However, if you have preexisting conditions or other health concerns, you'll want to double-check to make sure you have continuous coverage. As long as you don't go more than 63 days before your new insurance kicks in, insurers must include your previous insurance when making decisions about preexisting conditions.

Usually, it'll make sense to take your new coverage rather than using COBRA. If you have a current condition that incurs substantial medical costs, however, check with your new provider before your COBRA period ends to make sure your new insurance will cover those costs. If not, you may be better off sticking with your old insurance plan to keep your current benefits, even if your premium costs become higher as a result.

For more information about getting health insurance, be sure to look at The Motley Fool's personal finance newsletter service, TMF Green Light. Longtime Fool contributor Selena Maranjian recently wrote about individual health insurance options for those who aren't part of an employer plan. You can get free access to Selena's article and much more with a 30-day trial. There are no strings attached.

Other related Foolishness:

Fool contributor Dan Caplinger has individual health insurance coverage at the moment. He doesn't own shares of the companies mentioned in this article. The Fool's disclosure policy keeps you covered.

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