What Is Insurance for Accidents?
Explaining Accident Insurance
DEFINITION:
Accident insurance is a form of insurance that only pays when the policyholder dies or suffers injuries in an accident.
Accident insurance gives rewards if you experience injuries or die in an accident. This sort of insurance does not often cover health care expenditures connected with a sickness, and does not pay a death benefit when the insured dies of natural causes.
What Is Accident Insurance?
Accident insurance is a form of insurance that only pays when the policyholder dies or suffers injuries in an accident. Accident insurance plans often have a limited payment value and do not cover expenditures linked with sickness. Accident insurance plans can not replace health or life insurance, but may augment such coverages. Accident insurance is affordable, widely accessible, and reasonably straightforward to purchase.
Let’s imagine Jane has a $500,000 accident insurance coverage. If Jane dies in a vehicle accident, her accident insurance policy will pay her beneficiary $500,000. If she dies of cancer, however, her accident insurance policy will pay nothing.
Understanding Accident Insurance
Unlike life insurance, accident insurance normally does not need underwriting.1 That means you may sign up for coverage provided in a group plan or buy a personal policy without undergoing a medical examination.
NoteIf you paid the premiums, accident insurance policy benefits are tax free. Payouts from an insurance policy put out via your company likewise are not taxed if you pay the premiums using after-tax dollars.
What Accident Insurance Covers
Accident insurance covers accidental fatalities and a broad variety of injuries that may include:
- Concussion
- Dislocation
- Dismemberment
- Eye injury
- Fracture
- Laceration
- Ruptured disc
- Serious burn
- Torn knee cartilage
Accident Insurance Advantages
If you’re handicapped in a covered accident and unable to work, accident insurance may help restore your income. Accident insurance may also reimburse additional expenditures, such as:
- Alternative therapies
- Ambulance service
- Grief and trauma therapy
- Emergency room services
- Hospital entrance fees
- Inpatient rehabilitation
- Medical appliances
- Medical tests
- Various forms of surgery
NoteWhen an insured individual dies due to a covered accident, their beneficiary gets a lump-sum payout. Some insurers also provide recipients the opportunity to receive monthly payments.
Exclusions
Like other forms of insurance, accident insurance comes with exclusions. For instance, an insurance may not pay if the insured experiences a harm while inebriated or committing a felony. Policy may also exclude injuries caused by a preceding sickness.
Other typical exclusions are death or injuries caused or experienced by:
- Taking part in a war
- Learning to fly an aircraft
- Driving without a driver’s license
- Participating in dangerous sports such as rock climbing
- Suicide or intentional injury
- An overdose of a medicine or chemical not recommended by a physician
Payouts
If a person with accident insurance dies due to a covered loss, the insurance company would pay 100% of the policy's principal value. For example, if the insured held a $500,000 accident insurance policy and died in a vehicle accident, their beneficiary would get a $500,000 settlement. But, accident insurance compensates a smaller proportion for other sorts of injuries. For example, if you lose a hand in an accident, an insurance may pay 50% of its original payment; if you lose an index finger, it may cover only 25%.
NoteYou would get a compensation from your accident insurance regardless of fault, unless explicitly excluded. For example, if the insured perished in a vehicle accident while driving intoxicated, the insurer would most certainly refuse the claim.
Family Coverage
Certain accident insurance policies enable you to add a spouse or partner and dependant children. Yet, a plan may only offer complete coverage for the policyholder. For instance, an insurance could only give 50% coverage for domestic partners and spouses, and 15% coverage for each dependent child.
If an accident injures or kills everyone covered by an accident insurance policy, it will only pay up to the coverage amount. For instance, if a family of four has a $100,000 insurance, and all four experience severe injuries in a boating accident, the insurer will pay a maximum of $100,000.
Cost of Accident Insurance
Depending on the insurer or employee benefits plan, you may normally acquire accident insurance in increments of $10,000 to $50,000. Normally, the coverage is extremely reasonable. For example, some employer-based group accident insurance policies provide $50,000 in individual coverage for as low as $1.25 per month and $500,000 in family coverage for roughly $17.50 per month.
Do I Need Accident Insurance?
Although it's often inexpensive, obtaining accident insurance is something to consider. Yet some people and families are expressly recommended to obtain accident insurance, including:
- Individuals who don’t have proper health insurance
- Families with a single breadwinner
- Families with young children
- Individuals with an active lifestyle
- Individuals with a restricted budget for unanticipated medical bills
Additional Key Coverages
Accident insurance is a sort of supplementary insurance, and because it only pays when you’re hurt or killed in an accident, it does not give all the protection you need. You may also desire to consider obtaining disability, life, and health insurance coverage.
- Disability insurance: Disability insurance helps replace a part of your income if you’re disabled by a sickness or accident. You may acquire short-term disability coverage, which might cover impairments that last up to two years, or long-term coverage, which can offer lifelong benefits.8
- Health insurance: Health insurance gives a more complete range of benefits. With this kind of insurance, after paying a deductible out of cash, the insurer pays a percentage of your health care expenditures. Generally, health insurance plans cover expenditures such as emergency treatments, hospitalization, maternity and infant care, laboratory services, mental health and drug misuse therapies, pediatric care, and preventative services.
- Life insurance: Life insurance gives a death payment to one or more beneficiaries when the insured dies, even through natural causes. You may acquire life insurance for a particular duration or lifelong coverage.
The Bottom Line on Accident Insurance
According to the Centers for Disease Control and Prevention, emergency rooms handled approximately 98 million accidental injuries in 2018. Injuries are the fourth biggest cause of mortality, affecting the lives of about 201,000 individuals each year.Purchasing accident insurance makes excellent financial sense, particularly if you have loved ones who rely on your income. It’s inexpensive, doesn’t involve undergoing a medical test, and is widely accessible via insurance companies and many employee benefits programs.
Important Takeaways
- Accident insurance only provides a reward when the insured gets injuries or dies due to an accident.
- This sort of coverage comes with exclusions and does not often cover illness-related expenditures.
- Accident insurance does not need a medical evaluation.
- You may acquire accident insurance from an insurance provider as well as through various employer group plans.
- Accident insurance is inexpensive and accessible for individuals and families.
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