Is Short-Term Coverage Right For You? – Forbes Advisor

Losing your job is stressful enough—sky-high health insurance costs shouldn’t make it worse. With Affordable Care Act (ACA) plans averaging more than $500 a month, many newly unemployed Americans may find themselves scrambling to afford coverage once their employer-sponsored plan ends.

With the unemployment rate ticking up to 4.2% in July 2025 from 4.1% a month prior, more workers risk losing not just their paychecks but also their health insurance. The rising unemployment rate can signal a cooling economy, making it more urgent for those newly out of work to find replacement coverage quickly.

What Happens When You Lose Your Health Insurance?

Losing your job doesn’t just mean a loss of income—it can also leave you without health insurance, which is the last thing you want to worry about in uncertain times. One option people often look at is Continuation of Health Coverage (COBRA), which lets you stay on the same health insurance plan you had through your employer for up to 18 months.

This might sound tempting, but there’s a big catch: you’re responsible for the full premium. This can easily push your monthly cost into the hundreds or even thousands, which isn’t exactly doable when you’re out of work.

This is where another option comes in handy: short-term health insurance. Short-term health insurance is designed to fill the gap while you look for your next job. It’s usually much cheaper than COBRA and can start almost immediately. But it comes with some serious trade-offs: Coverage is usually limited, and many don’t include things like preexisting conditions, mental health care or prescription drugs.

Pros of Short-Term Health Insurance

• Affordability. Short-term plans tend to carry lower monthly premiums than COBRA or ACA marketplace plans, making them a more budget-friendly option when you’re searching for new employment.
• Immediate coverage. Unlike ACA plans that may have waiting periods or restricted enrollment windows, short-term plans often activate immediately, even the next day, offering quick protection when you need it most.
• Flexibility. You can typically choose the duration of your coverage—up to a few months—and cancel anytime without penalty, helping you tailor it to your specific job-search timeline.

Cons of Short-Term Health Insurance

• Limited coverage. These plans are exempt from ACA requirements, meaning they often exclude essential health benefits like preventive care, mental health services, maternity coverage and treatment for preexisting conditions.
• High out-of-pocket costs. Many short-term policies come with steep deductibles, high coinsurance and coverage caps.
• Regulatory restrictions. Recent federal rules limit coverage: plans issued after September 2024 can last only three months, with a possible extension to four. And depending on your state, these plans may even be prohibited, such as in New York, where short-term plans are not allowed due to state regulations that mandate renewability.

Is Short-Term Health Insurance Right for You?

If you’re in decent health but have recently become unemployed and need coverage to hold you over for a bit, a short-term health plan might be a budget-friendly option. But be sure to read the fine print, as these plans often have exclusions, coverage limits and caps.

While short-term coverage can bridge the gap, you may still want to consider an ACA marketplace or COBRA plan for more comprehensive, long-term insurance, especially if you have ongoing or greater health needs.

Bottom Line

As unemployment inches upward—now holding at 4.2%—many Americans find themselves at a crossroads: needing affordable, interim health coverage while seeking stable employment.

Short-term health insurance offers fast, budget-friendly coverage that works well as a temporary bridge. However, it has trade-offs that you should consider before enrolling. Choosing the right healthcare coverage while between jobs can help maintain your peace of mind during an already stressful time.