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Everything You Need to Know About Accident Insurance

by Stephanie Colestock,  May 5 2020

No one intends for accidents to happen… after all, that’s why they’re called accidents. But just because they are unintentional, unpredictable, and (in many cases) unpreventable, it doesn’t mean that accidents aren’t also very inconvenient.

While the word “accident” probably makes you think of a vehicle collision, accidents can involve a variety of situations. They can be anything from a neighborhood dog bite, a slip down icy steps, or even a torn ACL during a pick-up basketball game. But regardless of how an accident occurs, it has the potential to be financially devastating. 

That’s where accident insurance can come into play.

What is Accident Insurance?

Similar to many other types of insurance coverage, accident insurance is a product that provides financial protection in exchange for paying regular premiums. It is supplemental coverage; if you are injured or disabled in a covered incident, you may be able to file a claim to help with extra expenses following your accident.

With accident insurance, you will typically receive a lump sum payout. While these funds are intended to help cover expenses related to your injury or recovery, there aren’t usually restrictions on how you use it, giving you flexibility on what you put that money toward.

Accident insurance coverage can be purchased alongside your existing health insurance and life insurance policies. However, because this type of insurance offers limited coverage within a very narrow scope, it is recommended as a supplemental product… rather than in lieu of current coverage.

What is the Difference Between Health Insurance and Accident Insurance?

There are a few key differences separating health insurance from accident insurance. Because of this, it’s important to recognize that accident insurance is not a replacement for health insurance coverage. However, you may find that both policies are worth purchasing.

The primary difference is that accident insurance usually pays out a lump sum if you are injured or disabled. Health insurance, on the other hand, will pay a portion of covered medical expenses up to predetermined amounts.

With accident insurance, this lump sum payout comes to you — rather than to your healthcare provider — and does not need to be used for any specific expenses. You can use the money however you’d like. This includes replacing lost income, paying for household services or rent, and even covering pricey medical bills.

What Accident Insurance Covers

Each accident insurance policy is unique, and coverage limits will vary from one provider to the next. Often, though, you’ll find that accident insurance covers the following:

  • Burns
  • Bone fractures
  • Concussions
  • Lacerations (cuts)
  • Dislocations
  • Eye injuries
  • Dental injuries
  • Dismemberment

The type of the injury matters in terms of accidental insurance coverage. A dislocated shoulder, for instance, won’t offer the same amount as a dismembered arm.

Some policies will offer a sliding scale for coverage, too, based on the degree of injury. This means that a broken wrist won’t pay out as much as, say, a fractured leg or broken back. And losing a finger isn’t likely to offer as much coverage as the amputation of both legs.

Be sure to read the fine print of your policy to see what is and is not covered, and how much you can expect from a covered injury. 

Some accident insurance policies also offer accidental death and dismemberment clauses. These are similar to the AD&D coverage provided by standard life insurance policies, but it’s important to note that the payout is usually significantly less with accident insurance.

Are Accidents Covered by Health Insurance?

You might be wondering why you need accident insurance coverage in the first place. Aren’t accidents and their related injuries already covered by your health insurance policy?

The answer is both yes and no.

Yes, you can expect that your health insurance policy will kick in for covered expenses related to any number of injuries. If you break a bone or get a concussion, your health insurance will more than likely pay their share of approved expenses for your care. 

However, you’ll be out of luck for your portion, which will need to be paid out of pocket. You’ll also be on the hook for any additional, non-healthcare expenses related to your injury… which is when accident insurance could kick in.

Here are a few reasons why accident insurance is beneficial to add as supplemental coverage, on top of health insurance:

  • Health insurance policies often exclude dental-related injuries. 
  • You will need to meet your health insurance policy’s deductible before medical bills are covered. Depending on your policy, this can be thousands of dollars out of pocket. 
  • Health insurance is intended to cover a portion of qualifying expenses, meaning that you will still need to “share” some of the cost. If you don’t have savings, your obligation can be financially devastating.
  • With health insurance, you’re usually limited to providers within a defined network; accident insurance has no such limitations.
  • Health insurance does not cover lost income due to an injury, household expenses that you may incur, or offer a lump sum following an incident.

Who Should Get Accident Insurance?

Accidents can happen to anyone at any time, no matter how careful you are. When they do, it can potentially be both inconvenient and expensive, impacting everything from your savings to your monthly income and even your ability to manage everyday tasks.

While health insurance often covers a percentage of your medical bills, that’s not always enough. You may also need help paying for basic household expenses and covering lost wages. Adding a supplemental accident insurance policy might be just the safety net you need.

Editorial content on Gabi.com is not written by a licensed insurance agent. It is intended for informational purposes only and should not be considered legal or financial advice.

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