Personal accident insurance is a form of financial protection that provides a lump-sum payment to cover costs that your primary health insurance doesn’t pay for that result from serious injury.
Accidents happen all the time—and most of us think they will always happen to someone else. Here’s the definition of personal accident insurance and what it will do for you. In addition to providing a fixed benefit amount for protection from a physical injury or accident, personal accident coverage pays for the out-of-pocket costs that your existing health insurance does not such as the cost of the deductible, the non-medical costs and other out-of-pocket costs. Once a claim is accepted you are paid directly and the money is yours for you to do what you want with including paying for groceries, mortgage, bills and any other expenses.
Medical debt is now the leading cause of bankruptcy in America today. Understanding what your health insurance doesn’t pay is just as critically important as understanding what it does cover. Tens of millions of Americans are now insured through a high deductible health plan (HDHP), which has a lower monthly premium but a higher deductible (the amount that you must pay before your insurance kicks in). They can expect to pay about $2,295 out-of-pocket each year, in addition to their premiums, for medical treatment. And that doesn’t include associated non-medical costs like rehabilitation, transportation, or childcare.
Unfortunately most people don’t have that much money just sitting around. In fact, 46 percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money. A report from the U.S. Federal Reserve indicates that nearly half of adults are ill prepared for a financial disruption and would struggle to cover emergency expenses should they arise.
With personal accident insurance (also known as personal accident coverage, or individual accident insurance, or injury insurance) you pay a monthly premium that usually remains the same as long as you maintain the policy. You will receive a cash benefit if you have an accident or receive a serious injury during the policy term. This benefit can be used for any expenses, and will help ensure that your family is provided for even if you are unable to work.
What Is Covered With Personal Accident Insurance?
Personal accident insurance provides protection against physical injuries that may happen in everyday life–like biking or hiking or walking through a parking lot–that might leave you with a sprained ankle or broken arm or leg. Here are some specific out-of-pocket cost and non-medical expenses that personal accident insurance covers:
Out-of-Pocket Cost and Non-Medical Expenses That Accident Insurance Covers:
- Lost wages
- Rent or mortgage
- Car payments
- Child care
Another way to think about personal accident insurance coverage is that it provides peace of mind for you and your family and protection for your financial future. The upshot is that it pays you directly, in cash, in the event of an injury or physical accident. Once you make your claim the money is typically received in just a few days.
How To Choose an Accident Insurance Company
There are several things to look for in an accident insurance company and with an accident insurance policy. In particular, make sure that the company is reputable and in good standing. One important industry metric is the AM Best Rating which analytses the financial stability of insurance companies. AM Best is the oldest and most widely recognized provider of ratings, financial data and news with an exclusive insurance industry focus. Also be sure to check out the Better Business Bureau (BBB) which gives its own unbiased rating of companies based on consumer feedback and complaints.
Accident insurance plans and policies vary widely. Some employers offer group accident insurance is typically issued through the workplace on a and offers voluntary basis to cover employees as a group. These plans usually result in reduced cost for the coverage. Individual or personal accident insurance is also sold directly to consumers on either medical expense or indemnity basis.
- Medical expense: reimburses your out-of-pocket medical expenses resulting from an injury or accident.
- Indemnity: Reimburses a predefined amount for each eligible service received to help cover your out-of-pocket medical expenses resulting from an injury or accident.
As illustrated in the diagram below, medical expense either has a coordinating policy (where you are reimbursed for the out-of-pocket costs you paid for medical expenses) or a non-coordinating policy (where you are reimbursed for the full medical expense bill, regardless of the amounts you or your insurance paid).
Is Accident Insurance Worth It?
With many purchases there’s a subjective decision based on your personal lifestyle, financial situation, and budget. The main consideration with personal accident insurance is your tolerance for risk. Sure its an additional expense–(typically in the $10-20/month range). However the risk of not purchasing coverage means that in the event of an accident, if you do not have savings available for the out-of-pocket expenses you could be on the hook for a sizable hospital bill and other expenses.
How do you actually purchase accident insurance? Traditionally its through work, or through an insurance broker or agent. A great source for finding, comparing and purchasing accident insurance policies from various insurance companies is Emerge, a platform that helps sort through the decision making based on your lifestyle and budget.
Keep in mind that at the end of the day deciding to purchase accident insurance is a personal decision but many decide based on whether the cost justifies the peace of mind and the knowledge that they and their family are financially protected in the event of a major accident. Some things are indeed priceless.