What Is Accident Insurance?

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Accidents happen. In 2017 alone, there were 29.4 million ER visits for unintentional injuries, according to the U.S. Centers for Disease Control and Prevention. In addition to lasting physical harm and pain, an injury can wreak havoc on your financial life, especially if it impacts your ability to work or if treatment results in costly medical bills. The right type of insurance could provide some much-needed financial relief and help you focus on your recovery.

Accident insurance is a type of coverage that provides a cash payout should you suffer a covered injury. It's a unique financial safety net that can be a valuable supplement to health insurance and disability insurance. Understanding the nuts and bolts of accident insurance can help you determine if it makes sense for you. Here's how it works.

What Is and Isn't Covered Under Accident Insurance?

With accident insurance, the policyholder pays a premium to unlock coverage that can help pay for treatment and replace lost wages. Every policy is different, but they all typically contain an outline of payout amounts associated with specific injuries. Before you sign up for coverage, be sure to read the fine print, ask questions and make sure you fully understand what's covered.

Accident insurance tends to cover a wide spectrum of injuries, including burns, lacerations, fractures, concussions and dislocations. Covered services may also include emergency transport, emergency room or urgent care visits, hospitalizations, therapy services, surgery, and even medical devices. Generally speaking, payout amounts are higher for more severe injuries. For instance, you may receive $3,000 for a fractured hip, but only $300 for a fractured toe. Similarly, some insurance carriers will pay out up to $10,000 for widespread third-degree burns, but only $100 for localized second-degree burns.

Again, every accident insurance plan is unique and has its own terms and conditions. When shopping around for the right policy, take a close look at any exclusions. For example, you may be on your own if you injure yourself while on the job or while participating in an excessively risky activity—like drag racing or flying in a private plane with an unlicensed pilot. Injuries that occur while you're under the influence of alcohol or narcotics will likely be off the table, as well.

Is Accident Insurance Worth It?

Whether accident insurance is really worth it all depends on your individual situation. While it certainly isn't meant to replace traditional health insurance or disability insurance, it can be a useful supplement that helps round out your overall coverage. Those who have a health plan with a high deductible (meaning you'd have to pay a lot out of pocket before coverage kicks in) may find low-cost accident insurance valuable. Receiving a cash payout after a covered injury could help ease the financial burden of meeting that deductible.

It can also be helpful in providing coverage when disability insurance falls short—such as if you're injured severely enough that you require medical attention, but not so badly that you're unable to work. In this scenario, disability insurance would not kick in, but accident insurance could provide some level of financial relief.

Each insurance provider has its own rules around eligibility. If accident insurance is being offered as an employee benefit, your eligibility may be determined in part by your employer. Things like your weekly hours and overall length of service may come into play. Alternatively, you may choose to purchase accident insurance independently as either a standalone policy or in addition to an existing dental, vision or critical illness policy. Just keep in mind that some insurers may reduce your accident insurance benefits as you age.

How Much Does Accident Insurance Cost?

When it comes to insurance policies, higher premiums typically translate to more thorough coverage and lower deductibles. How much you'll ultimately pay for accident insurance comes down to factors such as your level of coverage and age. Those who prefer a lower deductible or more inclusive coverage will likely face a steeper premium. With that said, policies tend to range in price anywhere from $5 to $50 monthly.

How to Cover Medical Costs

Accident insurance isn't the only way to offset your medical costs. There are other types of supplemental insurance and financial products available that could help relieve the burden. Some options to consider may include:

Disability Insurance

Like accident insurance, disability insurance will pay out a benefit should you suffer a covered injury. One big difference, however, is that disability insurance tends to provide more significant financial relief that's delivered in monthly installments. In some cases, long-term disability insurance could replace up to 60% of lost income. In order to receive the benefit, you must be unable to work due to your injury.

Dental Insurance

While some accident insurance policies do cover dental injuries, every plan is different. The coverage may not be adequate in the face of a serious injury, which is why dental insurance might be worth exploring. Most include preventative exams, cleanings and emergency services to help keep your oral health going strong. And if you do need to file a claim, it could result in lower out-of-pocket costs when compared with accident insurance alone.

Health Savings Accounts (HSA)

An HSA is an account you fund with pretax income that you can use to pay for qualifying medical expenses. This includes deductibles, copays, medicine and more. You must have a high-deductible health insurance plan to qualify, but your contributions are tax-deductible—meaning they lower your taxable income. HSAs work very differently from accident insurance, but they're alike in that an HSA can provide a pool of money you can draw on to pay for medical care related to an injury.

Payment Plans and Financial Aid

Many hospitals and health care providers offer payment plans so that patients don't have to foot the entire bill at once. No matter what, it's always wise to request an itemized bill and scan it for errors before paying. Partnering with a medical billing advocate can also prove helpful if you run into challenges during the resolution process. If all else fails, a personal loan may be a last resort for those who've exhausted their options and don't have an emergency fund to fall back on.

The Bottom Line

Accident insurance is relatively inexpensive and can provide financial peace of mind should you suffer an injury that's covered by your policy. Think of it as a type of supplemental insurance that could potentially lower your out-of-pocket medical costs. It's all part of maintaining your financial health—something that goes hand in hand with checking your credit. Take the first step for free with Experian.