When Donald Penzenik was laid off in 1981, it couldn't have come at a worse time. His wife, Vicky, was expecting their second child, and their hometown of South Bend, Ind., was reeling from recession.

But Penzenik didn't panic. As a hard worker with a good employment record, he figured he would find something soon. And he was right.

Nonetheless, despite the fact that he has a management job with a small electroplating company, Penzenik and his family today live in virtual poverty -- no savings, no retirement accounts, no life insurance, a 12-year-old car. "We lead lives of indentured servitude," he said last week.

The reason: Their son, Michael, born while Penzenik was out of work and thus not covered by a medical insurance policy, has cerebral palsy. Now 8, Michael cannot walk, talk, dress or otherwise care for himself. And as far as Penzenik can tell, no insurance company will touch him.

Today, Michael is covered by Medicaid. His family qualified for this government program for the poor by "spending down" all their assets, and now is "unprotected {economically} and vulnerable to financial disaster," Penzenik said.

The Penzeniks are not alone. Thousands of families have fallen through the cracks in the medical insurance system, and these days, as the economy turns down and layoffs and business failures return to the headlines, more may soon be joining them.

Similar disasters can also befall people who leave their jobs voluntarily, perhaps to pursue a better offer or to start their own business or professional practice.

There are, however, precautions that can be taken to cut the risk. First and foremost, experts say, you should obey the First Law of Wing-Walking: Never let go of what you've got hold of until you've got hold of something else. Leaving a medical plan without making sure you can get into a new one violates this law.

But leaving an employer -- voluntarily or not -- doesn't mean you have to give up your insurance, at least not right away. Under federal law, you are entitled to remain on your former employer's plan for up to 18 months if you pay a premium slightly higher than what your employer was paying.

This right is known as a COBRA benefit, after the Comprehensive Omnibus Budget Reconciliation Act that provided it.

In addition, 41 states have laws on the books providing specific rights to continue your old employer's coverage and/or to convert it to an individual policy. And 24 states -- none in this area -- have pools designed to provide insurance for people who cannot qualify for it on the open market.

It's important to learn what your options are and keep them in mind even if you've got a new job lined up because companies and their insurers have widely differing rules.

At one extreme is the federal government. If you are going to work for Uncle Sam, you may find insurance expensive but you'll be able to get it. Under rules of the Federal Employee Health Benefit Program, there are no waiting periods and no preexisting condition exclusions. Not only do they have to take you, but you can switch carriers once a year to shop for the coverage that best fits your expected needs.

Private employers usually have restrictions. Most companies or their insurers require a waiting period before their coverage kicks in. Holding on to your previous plan under COBRA will protect you during this interval.

A growing number of insurers engage in what is called "medical underwriting," which means that they may refuse coverage or charge higher premiums to people who have something in their medical histories that the insurer doesn't like.

So if you -- or a dependent -- have some medical condition or ongoing ailment, consult the benefits person at your new employer and find out if you will be covered. Small companies, which shop hard for insurance, can be quite restrictive and refuse coverage altogether.

Many large companies "self-insure" and are willing to cover such "preexisting conditions," as the insurance industry calls them. Many have waiting periods. So check, and if possible get the answer in writing. And don't ignore some condition just because it seems minor.

James E. Challenger of the Chicago-based job placement firm of Challenger, Gray & Christmas, said, "The big problem is where there's a previous problem that hasn't been serious, then it becomes serious ... and the new employer's insurer goes back and says that was a previously existing condition.

"We normally recommend that they continue prior employer's coverage. It costs them more money," but an uninsured illness can cost a whole lot more, he said.

Note also that COBRA benefits are available for 18 months for former employees but can extend to 36 months for employees' dependents.

Erling Hansen, general counsel of the Group Health Association of America, noted that if you have, say, a child with a chronic illness, it might be "in your best interest to break the child away into separate individual COBRA coverage."

COBRA benefits are not permanent, of course, though some ailments are. So if you find that you will not be able to get coverage from your new employer -- of if there is no new employer -- you may be able to convert from COBRA to an individual policy. This is likely to be expensive and may result in less coverage, but it is better than nothing.

Challenger and others noted that people who lose their jobs are often tempted to waive their COBRA rights to try to save money. But unless it means you can't eat, the COBRA premiums are worth paying -- the coverage may save you from ruin. And compared to buying coverage privately, "COBRA is one helluva good deal," said Greg Scandlen of Blue Cross.

One caveat added by Hansen is that if you are in a health maintenance organization and have to leave the area, you may not be able to use the HMO anymore, so check with your new employer to see if you can work something out.

Two-income families have an added cushion against medical-insurance disaster, but they, too, have to be careful. Because insurers coordinate benefits, carrying two coverages may be very expensive while providing little extra coverage. It may make sense to drop one policy.

But before you do that, think carefully: Is either of you in danger of being fired? Does one of you work for an employer that might go out of business? If you drop one spouse's coverage and the other loses his or her job, it may be tough to rejoin the plan you left, especially if someone in the family is sick.

No amount of caution can ensure that you won't lose your coverage. If your employer folds or if you are laid off and cannot afford the COBRA or conversion premiums, you may be out of luck.

Even doctors are not immune.

Robert S. Mirsky, a 31-year-old physician from the Bronx, discovered during his medical residency that he had cancer. Since then, he has been struggling to find insurance anywhere. Now near the end of his COBRA benefits, he is desperate. He told the House Consumer Protection subcommittee last week that he may be unable to practice medicine. He said he has at last found a policy that might cover him after a year's waiting period, but he is terrified that he might need some expensive treatment in the meantime.

Today, only the rich can afford to pay for health care out of their own pockets. As the Penzeniks' case illustrates, the wrong illness at the wrong time can spell ruin for almost any middle-class family. Most people get good coverage through their jobs and take it for granted. Not until they have a serious illness do they realize how valuable it is.