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Accident insurance: What is it, how does it work & do I need it?

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Aren’t accidents covered under my health insurance? Can I collect disability benefits if my accident insurance policy also pays me benefits? How does accident insurance work, anyway?

These are common questions people ask when presented with the option of applying for accident insurance coverage. Like other types of supplemental coverage, there is some confusion as to the value of having accident insurance. Has accident insurance really proven to be valuable for individuals that have suffered a mishap?

Here, we’ll take a closer look at what accident insurance covers, how it works in tandem with other coverage you may have, the cost of coverage, and its value to you as a consumer.

Accident insurance definition

Accident expense insurance — accident insurance for short — is a type of supplemental policy that pays out a lump sum cash benefit if you are injured due to a covered accident. Accident insurance is commonly used to fill gaps in other types of coverage, such as health and disability insurance. (It is not a substitute for either.) Accident insurance coverage can be purchased individually through a private carrier, obtained as part of a group plan, or both.

What does accident insurance cover?

By definition, an accident policy will pay benefits as outlined in the policy for a covered accident. There are several key phrases in this definition that merit a closer look.

"As outlined in the policy"

As with any insurance policy, it’s wise for you to read an actual policy itself, not just a brochure or online description of what a policy covers and what it doesn’t. You’ll probably be paying premiums on a policy for years, so it makes good sense to know exactly what you’re paying for and what you will receive in exchange if you have an accident.

"Covered accident"

You want to know up-front what types of activities will be covered if you have an accident, and which won’t. For example, if you have a hobby that may be considered dangerous, like sky-diving or horse-jumping, you may read the policy and see that these activities won’t be covered in case of an accident. Knowing this before you apply for coverage is important, as it may affect your decision as to whether to purchase a policy or not.

Unlike major medical insurance, accident insurance does not cover direct costs associated with treatment. For example, if you fracture a leg, your accident policy won’t directly cover the costs of anesthesia if you need surgery to set it. Your coverage would make payment directly to you so that you can offset the cost of that surgery, but it doesn’t pay specifically for surgery or surgical expenses.

Payment received from an accident insurance policy can be used to pay for expenses incurred, some of which could include:

  • Medical deductibles and co-payments
  • Ambulance costs
  • Crutches
  • Physical therapy
  • Household expenses, such as a wheelchair ramp
  • Many other associated expenses

Learn More: Personal Accident Insurance

How does accident insurance work?

Accident insurance pays “on top of,” or in addition to other types of insurance you may have. Different types of policies that are not affected by accident policy benefits you may receive are:

If you have any of these coverages and suffer a covered accident, payment would be paid to you as outlined in the coverage. Accident insurance policies supplement the benefits from the other kinds of policies listed above; they don’t replace them.

Learn More: Supplemental Health Insurance

Personal vs. group accident insurance

In addition to applying for accident insurance on your own, you may find that your employer offers supplemental insurance coverage as a benefit to employees. Employers do this because they recognize that today’s high deductible medical insurance plans cause many employees financial hardship and stress if they become sick or injured.

Many employees have requested that their employers provide supplemental group accident insurance since they are in hazardous jobs or participate in activities outside of work, which could lead to accidents, such as when playing co-ed softball or other sports.

Learn More: Personal Accident Insurance

Is accident insurance worth it?

Many people have accident insurance to avoid using their savings to pay expenses associated with an accident they’ve suffered. In some cases, having to withdraw money from savings can lead to financial hardship. Some people find it makes better financial sense for them to pay monthly premiums and receive a lump sum, cash benefit paid directly to them to avoid taking money out of savings.

Here's an example of how someone could benefit from an accident insurance policy for fracturing their leg while playing flag football with their children:

  • Medical expenses incurred for treatment at the hospital: $7,800
  • Medical insurance deductible: $1,000
  • Co-insurance of 20%: $1,560
  • Lump-sum accident insurance payment to insured: $2,500
  • Total out-of-pocket costs for insured: $60

As can be seen, in this instance, deductibles and co-payments were in effect paid for by the accident policy, leaving the insured with little out-of-pocket expense and no need to invade their savings account. The insured would be satisfied with how the policy paid them directly as promised by the insurer, and they would find the cost of coverage to be worth the expense.

Learn More: Is Accident Insurance Worth It?

How much does accident insurance cost?

The cost of accident insurance will vary by insurer and the benefit amount which the insured chooses. Many people find it to be a relatively small premium compared to the other insurance coverage they pay for each month, with premiums ranging anywhere from $15 to $50 or more per month. As with any insurance coverage, you won’t mind the cost when you’re receiving the benefit.

Whether you lead a very active lifestyle or one which is more sedentary, accident coverage can be a welcome addition to supplement your other insurance coverage. Slips, trips, and falls can happen to anyone, anyplace — even in the home. Consider rounding out your protection with an individual accident policy or by taking advantage of group coverage where you work.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published June 10, 2020
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group-accident-insurance-thumbnailLast updated April 19, 2021

Group accident insurance: If your employer offers it, should you take it?

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Jack Wolstenholm
The main difference between personal and group accident insurance is that group policies are available to members of a group, such as employees of a company. This typically makes it cheaper to own because the insurance company is spreading its risk over several policyholders. Also, eligible employees are usually guaranteed to receive coverage without answering health questions or having a physical exam.

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