A Guide to Accident Insurance

Shawn Plummer

CEO, The Annuity Expert

If you are like most people, you probably don’t think about accident insurance until you need it. And that’s the problem. Accidents happen. Most people only think about it when they’re in an accident and need to make a claim. By then, it’s too late. Accident insurance is one of those things that you hope you never have to use, but if you do, you can receive cash benefits which could be a lifesaver.

What Is Accident Insurance?

Accident insurance is a type of insurance where the policyholder gets money directly if they suffer an accidental injury. They can spend the benefit payment however they want to. Accident insurance plans are not a replacement for your current health insurance plan, it is a supplemental accident insurance policy that pays benefits if an accident occurs.

How Does It Work?

Accident insurance policies cover individuals or families. Each policy specifies its benefit amounts, covered injuries, and exclusions and limitations in the policy documents. Your premium varies depending on the policy’s annual benefit limit, often $10,000 to $25,000. There are no copays for these types of policies. Additionally, out-of-pocket expenses are usually minimal. In many cases, accident insurance deductibles are either small (usually $250 or less) or nonexistent.

The amount of your benefits payout is relative to how severe your injury is. For example, for less serious injuries, such as a minor laceration, you could receive less than $100. However, the amount could be upwards of $10,000 or more for major accidents. In addition, most policies also cover associated costs incurred from the accident. These can include things like hospital stays (usually covered at around $350 per day), ambulance rides ($300 on average), and physical therapy sessions (around $40 each).

Some policies don’t even require a medical exam for enrollment- you can simply buy the policy! Plus, once enrolled, your policy is automatically renewed as long as you keep up with premium payments. Although, there may be restrictions regarding age limits. It’s essential also to note that accidental insurance policies and accidental death/dismemberment insurance are two different things- though many companies offer combo packages that include both policies.

What Does Accident Insurance Cover?

Accident insurance plans will help you pay for major medical and other extra costs you might have after an accident.

Accident insurance can help you pay for the following:

  • Unexpected Medical expenses, including hospitalization, surgery, ambulance transportation, and doctors’ fees
  • Lost wages if you’re unable to work because of your injury
  • Funeral expenses
  • Other out-of-pocket costs, such as transportation to and from doctor’s appointments or physical therapy sessions

Accident insurance is typically sold as a standalone or supplemental insurance to a primary health insurance policy. If you have health insurance, check if it includes accident insurance coverage.

Who Should Get Accident Insurance?

A supplemental accident insurance plan is one of those things that you don’t want to buy but is glad you have when something bad happens. If you’re in a serious accident, there will likely be some out-of-pocket expenses not covered by your major medical insurance.

For example, if you broke your leg, the surgery could cost $7,500. Most health insurance plans only cover 80 percent of that total, which means you would have to pay for the other $1,500 by yourself.

If you are hospitalized due to an accident, having an accident insurance plan would alleviate some financial burdens. The average cost of a three-day hospital stay with major medical coverage is $30,000. If your health insurance only covered 80 percent of the bill, you would be responsible for paying the remaining $6,000 out of pocket. An accident insurance plan that covers up to $1,400 worth of expenses would cover almost one-fourth of your total costs!

People who should strongly consider a supplemental accident insurance policy include:

  • Self-employed individuals without paid sick leave could use accidental injury insurance benefits to compensate for lost wages.
  • People who don’t have a Health Savings Account (HSA).
  • If you often participate in physical activities like biking, rock climbing, skiing, or playing sports, you’re more likely to get hurt than those with a sedentary lifestyle. Thus, you would benefit more from having an accident insurance plan.
  • Parents with children should get an accident insurance policy. Kids are prone to accidents, and this policy can help cover out-of-pocket costs that your health insurance won’t.
  • Anyone who doesn’t have or wants to use emergency savings for accidents.

Accident Insurance Vs. Other Supplemental Health Plans

Disability Insurance Coverage

Disability insurance is supplemental insurance that protects your income if you get sick or are injured and can’t work. The insurance company will give you money to help pay for things, including medical costs, similar to your regular paycheck.

Accidental Death & Dismemberment

Accidental Death and Dismemberment is an accident insurance policy that only provides a payout if the policyholder dies or suffers a severe injury in an accident covered by the policy. Covered accidents usually involve death or dismemberment.

Fixed indemnity plans

Fixed-indemnity health insurance is a type of health insurance that pays a set amount of money for each medical event, treatment, or service. This type of health insurance can help cover the costs associated with preventive care. Fixed-indemnity health plans do not have to follow Affordable Care Act (ACA) coverage rules.

Short-term health insurance

Short-term health insurance is a type of insurance that only lasts for a set amount of time, usually several months to a year.

Critical illness insurance

Critical illness insurance gives you money when you have a medical emergency like heart disease, cancer, or a stroke. The cash from these policies helps with the extra costs that come with these illnesses.

Truckers’ Occupational Accident Insurance Coverage

Truckers’ Occupational Coverage is a supplemental disability insurance coverage that truck drivers can purchase to protect their paycheck if they get injured.

What Does Personal Accident Insurance Not Cover?

While considering if personal accident insurance is right for you, it is also pivotal to be aware of what isn’t included in the coverage. This includes self-inflicted injuries, dental trauma, accidents that happen while intoxicated or breaking the law, and mishaps resulting from pre-existing conditions.

Why Is Personal Accident Insurance Important?

Personal accident insurance provides crucial protection by reimbursing your medical bills if you’re hurt in an accident. In addition, accident insurance pays for certain types of alternative treatments and – if you die from accidental injuries – gives a lump sum payout to your beneficiaries.

Is Accident Insurance A Good Idea?

Accident insurance is relatively simple. In the event of your death or disability due to an accident, it would pay you or your beneficiaries cash in a lump sum. This type of insurance is important because it can help you financially if you’re in an accident, and it can also be used to cover any final expenses.

Next Steps

An accident insurance plan is a great way to get supplemental coverage in case of an accidental injury. The policyholder gets money directly from the insurer and can spend it however needed. These plans are very affordable and easy to purchase. If you are interested in getting an accident insurance policy, contact us for a quote today.

What Is Accident Insurance? How Does Accidental Insurance Work?

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Frequently Asked Questions

Are accident insurance proceeds taxable?

Any benefits received are not taxable if you pay for an accident or health insurance policy. In addition, if your employer pays into an insurance plan on your behalf and you pay premiums with after-tax dollars, then the payout is also not taxed. However, the benefits will be considered taxable if you have a cafeteria plan through your employer and pay premiums with pre-tax income.

Can I get accident insurance through an employer?

Yes! Voluntary accident insurance is an insurance policy that an employer may offer employees. If employees wish to enroll in the coverage, the premiums are deducted from their paychecks.

How much personal accident insurance should I get?

Many people choose not to obtain an accident insurance policy because they feel it’s rare to be seriously injured or die from an accident. But unfortunately, the truth is that accidental injuries and deaths are not as uncommon as one might think, especially among specific age groups or those with dangerous jobs or lifestyles.

You should decide how much accident insurance your family needs by thinking about how they would fare financially if you got injured and had to pay a hefty hospital bill or if you died suddenly and they lost your income. Most families don’t have room in their budget for unexpected expenses, so you must ensure that your loved ones are taken care of if something happens to you.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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