What Is Accident Insurance Coverage?

Accident insurance isn't a replacement for health insurance or life insurance, but it can help cover accident expenses that your health plan doesn't cover.

What is accident insurance?

Accident insurance is a type of insurance policy in which you pay premiums in exchange for coverage of expenses from injuries caused by accidents. While health insurance policies pay for covered medical expenses with no upper limit after you meet deductibles and co-pays, an accident insurance policy will only pay up to the sum specified in your policy for each injury. You would be responsible for any costs beyond that if your regular health insurance policy did not provide coverage.

You may also be able to choose a policy or add a rider that provides a death benefit to your beneficiaries should you die from a covered accident. This may also be called accidental death insurance. However, a term life or whole life insurance policy is usually a better way to protect your family after your death, and you can often add an accidental death rider to your policy that increases the death benefit if you die from a covered accident.

Accident insurance benefits can be paid out as a lump sum or installments as specified in your policy. The amount will vary based on the type of injury you sustain. For example, an injury that requires surgery and a three-day hospital stay would qualify for a larger payout than an injury that is treated in your primary care physician's office. The benefit you receive will be based in part on the claim you file for the costs you’ve incurred.

Within the context of accident insurance, an accident is usually defined as an unfortunate event that is unintentional and unforeseen, such as a car crash or a fall from a ladder. Some policies will also cover non-medical expenses caused by an accident, so you will need to review the details of any accident insurance policy you're considering.

What does an accident insurance policy cover?

An accident insurance policy usually covers medical expenses for injuries caused by accidents. These costs could include hospital bills, doctors’ office visits and physical therapy. It can also help cover copays and deductibles.

Some policies cover non-medical expenses or let you use the designated lump sum for any purpose, as long as you sustained an injury in an accident.

What would not be covered by an accident insurance policy?

An accident insurance policy would not cover expenses due to illnesses, or expenses from accidents that don't cause injuries. And some accident insurance policies don't cover non-medical expenses. For example, an accident insurance policy might cover hospitalization to treat the injuries sustained in a car crash, but it wouldn’t cover car repairs resulting from the accident.

An accident insurance policy also wouldn’t cover recurring lost wages due to a disability you acquired due to an accident. You’d have to plan separately to cover income lost from a disability.

Since accident insurance usually has a specified coverage amount for any particular injury, any expenses beyond your policy's stated payout would not be covered.

Some accident insurance policies may have other limitations, so it's important to check the coverage details of your policy.

Where can I get accident insurance coverage?

Although you can buy a private accident insurance plan, the most cost-effective accident coverage is likely to come from a plan you purchase through your employer.

Accident insurance coverage through your employer

Some employers offer accident insurance as a supplemental benefit that you can choose when you enroll in employee benefits. Generally, the employee pays the premium for accident insurance.

Individual accident insurance policy

As an individual, you can purchase accident insurance directly from an insurance company.

Is accident insurance worth it?

Accident insurance may be worthwhile if you have a health insurance plan with a large deductible that you’d have trouble paying if an accident were to occur. While anyone can have an accident, you should consider whether your lifestyle puts you at higher risk for an accident. For example, if you often go rock climbing or skydiving as a hobby, you're more likely to have an accident than someone with less risky hobbies.

To learn more about how to prepare you and your family for accidents and other unexpected life events, speak with a financial advisor.