Gap Coverage Health Insurance: A Comprehensive Guide

Gap health insurance, or gap coverage, is a term that encompasses several different types of supplemental health insurance products. Each of these products will pay a benefit for events or costs that typically aren’t covered by your health insurance, like the deductible or coinsurance amount.

Gap health insurance isn’t meant to replace your existing health insurance. It’s designed instead to provide a safety net for the areas where traditional coverage often falls short. It can cover things like deductibles, hospital stays, sudden severe medical events or unexpected accidents. 

Types of gap insurance for health care

There are many types of gap coverage, each of which pays you for different situations. Some people opt for multiple types of gap health insurance, while others are comfortable with just one. 

• Medical Gap Insurance: Medical gap insurance is often used to pay for the co-payments, coinsurance or deductibles that come with many health insurance plans. It typically only pays these costs for treatments and procedures covered under your specific health insurance plan.

• Hospital Indemnity Insurance: Hospital Indemnity Insurance is a type of gap coverage that addresses out-of-pocket costs associated with a hospital stay – things like transportation, lodging for family and other unexpected expenses. It pays you a lump sum when you’re admitted to the hospital and you can generally use this money for anything you’d like. 

• Critical Illness Insurance: Critical illness insurance works to protect you from the financial consequences of serious diseases and conditions like cancer, heart attack and stroke. It pays you a lump sum when you’re diagnosed with a covered illness or condition so you can meet your deductible, stay on top of your mortgage payments or use it for anything else you need.

Take a moment to imagine you just suffered a serious health condition – a heart attack, for example. Hopefully it never happens, but if it does, you’ll likely end up in the hospital for several days resting, undergoing tests or maybe even having surgery. You’re able to recover, but there are serious financial effects. 

If you’re like most people, you have a High Deductible Health Plan (HDHP) requiring you to pay thousands of dollars out of pocket before insurance benefits kick in. Out-of-pocket expenses for an individual can reach up to $7,050, and if your family is also covered by your health insurance, you might need to pay up to $14,100. It’s a lot to pay all at once, and that’s before you consider expenses for travel to and from the hospital or appointments, time off work, and the dozens of other costs that unexpectedly appear.

Gap insurance helps you cover these costs without relying entirely on your savings. For example, a critical illness insurance policy could pay you when you’re diagnosed with a heart attack, hospital indemnity insurance could pay upon admission to the hospital, and medical gap insurance could help to cover the out-of-pocket costs of tests or procedures while you’re there. With gap health insurance products like these, you can drastically reduce or eliminate the impact to your savings.

When gap health insurance is needed

Gap health insurance is a good idea for anyone concerned about high medical costs. If you have a high deductible health plan (HDHP) it can help you avoid sudden large expenses if you need care. Certain types of gap coverage can help you with the deductibles from more common conditions and procedures. 

If you’re worried about serious health events like heart attacks or cancer, gap health insurance like critical illness insurance can provide you peace of mind since you know you’ll be covered if the worst happens. 

Traditional health insurance, like the type you’d get through your employer or through an Affordable Care Act marketplace, works by paying for a portion of your medical expenses until you’ve paid a certain amount, known as a deductible. After that point, it will pay for more of your costs, but you may still be responsible for coinsurance until you reach your out-of-pocket maximum. In 2023, this can be as high as $14,100 if you have a high deductible health plan (HDHP). Traditional health coverage also comes with additional restrictions on which doctors you can see and which treatments it will pay for. 

Coverage gaps occur where you need to pay out of pocket before your insurance will help. Deductibles, copays and coinsurance are all examples of coverage gaps. Other non-medical costs that occur when you’re sick can also be considered coverage gaps, like transportation, lodging and lost wages from time off work. 

Gap insurance for health can help you to meet these costs without dipping into your savings or going into debt. If the worst happens, it can pay for the things your insurance doesn’t cover and help you to stay on top of expenses.

Any number of people could benefit from gap insurance coverage. People with high deductible health plans could use any of the types of gap coverage we’ve discussed so far to help meet their out-of-pocket exposure. Self-employed individuals or gig workers who often face higher healthcare costs could use gap coverage to help reduce the impact on their savings if they face sudden medical expenses. Additionally, anyone who’s concerned about serious health conditions or worries whether their savings could cover sudden large expenses should consider critical illness insurance.

Critical illness insurance from Assurity can help you to stay on top of your finances if you ever face a serious condition or illness. It’s simple, affordable coverage designed to protect you from the financial impact of four of the most common serious illnesses: cancer, heart attack, stroke and advanced Alzheimer’s disease. It pays you a lump sum benefit if you’re ever diagnosed with one of these conditions, allowing you to focus on recovery instead of worrying about your finances. And as a Certified B Corp, you can trust we’re always working for good.

What is the difference between gap insurance and traditional health insurance?

Traditional health insurance works by covering your medical costs after you’ve contributed a certain amount. Gap coverage can help you to reach that amount without relying entirely on your savings, and can often help pay for costs not directly related to your health. 

Can you purchase gap insurance for health care at any time?

You can buy gap insurance any time so long as you qualify – but keep in mind most types of gap health insurance, like critical illness insurance, are more affordable the younger you are.  

What does critical illness insurance cover?

Critical illness insurance pays a lump sum benefit if you’re diagnosed with serious covered illness. The exact conditions depend on the policy, but to keep things simple Assurity’s Critical Illness focuses on cancer*, heart attack**, stroke and advanced Alzheimer’s Disease.

How do I know if I need gap insurance for health care? 

Gap insurance for health care is important to consider if you have high exposure to out-of-pocket costs (for example, if you have a high deductible health plan) or if you’re worried about relying on your savings for sudden, large medical expenses.

Can I purchase gap insurance for health care if I have a pre-existing condition?

You may not be eligible for coverage if you have a pre-existing condition, but it depends on your condition and the type of coverage you’re looking for. If you’re in doubt, the best way to find out if you can get coverage is to inspect the terms of your coverage or apply and see if you qualify.  

Is gap insurance for health care tax deductible?

Gap health insurance is not tax deductible. However, the benefit from coverage like as critical illness insurance or hospital indemnity insurance is paid to you tax-free.

Gap insurance should be an important tool for anyone who wants to protect their savings. Unexpected medical events can happen at any time, but with proper planning you can be ready. If you’re concerned whether your savings could last if you were diagnosed with a serious condition, consider critical illness insurance from Assurity. It’s a fast, affordable way to close major gaps and an essential part of your financial wellbeing. 

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Additional disclosure information

LIMITATIONS AND EXCLUSIONS (may vary by state)

Pre-existing Condition. Pre-existing condition means a sickness or physical condition for which, during the 12 months before the issue date or last reinstatement date, the insured person received medical consultation, diagnosis, advice or treatment from a physician or had taken prescribed medication. No benefits will be paid for a critical illness that is caused by a pre-existing condition unless the date of diagnosis is after the policy has been in force for 12 months from the issue date or last reinstatement date.

Waiting Period. Waiting period means the 30 days following the issue date or ten days following the last policy reinstatement date. The date of diagnosis of a covered critical illness must be made while the coverage is in force and after any waiting period. No benefits will be paid if a diagnosis or a medical consultation that leads to diagnosis of invasive cancer or non-invasive cancer occurs during the waiting period. If cancer is diagnosed during the waiting period, benefits will be paid for a subsequent diagnosis of cancer if the insured person is symptom- and treatment-free for at least 12 consecutive months and in complete remission prior to subsequent diagnosis.

Misstatement of Age and/or Gender. If the insured person’s age and/or gender has been misstated, an adjustment in premiums, coverage or both will be made based on the correct age and/or gender. If, according to the correct age, the coverage provided by the policy would not have become effective or would have ceased, Assurity’s only liability during the period in which the insured person was not eligible for coverage shall be limited to a refund of premiums.

Misstatement of Tobacco Use. If, during the first two years of the policy, the tobacco status of the insured person has been misstated, Assurity will revise the policy’s benefit amount to the amount the premium paid would have purchased using the correct tobacco status on the issue date.

The policy will not pay benefits for losses that are caused by or are the result of an insured person:

• being exposed to war or any act of war, declared or undeclared;

• actively serving in any of the armed forces or units auxiliary thereto, including the National Guard or Army Reserve, except during active duty training of less than 60 days;

• engaging in hang-gliding, hot air ballooning, bungee jumping, parachuting, scuba diving, sail gliding, motor vehicle racing, parasailing, parakiting, mountain or rock climbing, B.A.S.E. jumping, sky diving or cave diving;

• being addicted to drugs or suffering from alcoholism;

• being intoxicated (as determined by the laws governing the operation of motor vehicles in the jurisdiction where loss occurs) or under the influence of an illegal substance or a narcotic (except for narcotics used as prescribed to the insured person by a physician);

• committing or attempting to commit a felony;

• being incarcerated in a penal institution or government detention facility;

• engaging in an illegal occupation;

• intentionally self-inflicting an injury; or

• committing or attempting to commit suicide, while sane or insane.

Policy Form No. I H1820 underwritten by Assurity Life Insurance Company, Lincoln, NE.

IMPORTANT NOTICE— CRITICAL ILLNESS INSURANCE PROVIDES LIMITED BENEFIT COVERAGE. It is not a comprehensive major medical plan or Medicare supplement policy and does not satisfy the requirement for minimum essential coverage under the Affordable Care Act (ACA). It is not a substitute for major medical insurance and may not be appropriate for Medicaid recipients.

This policy may contain reductions of benefits, limitations and exclusions. Click here for standard Limitations and Exclusions. Product availability, features, rates, limitations and exclusions may vary by state. The state specific policy form is the ultimate authority for any questions about this product.

*In some states, diagnosis of cancer during the first 30 days following the policy’s issue date results in a significant benefit reduction or policy cancellation. The percentage benefit amount payable for invasive and non-invasive cancer combined cannot exceed 100%.

**Heart attack does not include established (old) myocardial infarction occurring prior to the issue date, sudden cardiac arrest, cardiac arrest or cardiopulmonary arrest.

Assurity reserves the right to order, at the company’s expense, evidence of insurability which the company feels is necessary for the prudent evaluation of the risk.

Assurity is a marketing name for the mutual holding company Assurity Group, Inc. and its subsidiaries. Those subsidiaries include but are not limited to: Assurity Life Insurance Company and Assurity Life Insurance Company of New York. Insurance products and services are offered by Assurity Life Insurance Company in all states except New York. In New York, insurance products and services are offered by Assurity Life Insurance Company of New York, Albany, NY. Product availability, features and rates may vary by state.