Sometimes, surprises are awesome: office birthday cakes, unexpected visits from far-away loved ones, and long-forgotten $20 bills tucked into coat pockets.
Some unplanned occasions, on the other hand, are decidedly less fun — like falling off a ladder, for example.
Preparing for unforeseen circumstances is what insurance is all about. You pay a monthly premium just in case something happens… and when it does, your coverage pays your benefits, saving you from financial ruin. (Hopefully.)
But there are a wide range of insurance products available, and you can’t afford everything.
So what about accident insurance? What is it? And do you need it?
What Is Accident Insurance?
Accident insurance, which is also called supplemental accident insurance or personal accident insurance, is a type of additional insurance product that covers specific injuries, like burns, lacerations, fractures, dislocations and concussions. Certain plans may also carry additional coverages, paying out for services like ambulance rides, physical therapy appointments and certain kinds of medical testing.
Accident insurance is sometimes bundled with critical illness insurance, and is often offered through employers alongside traditional health insurance coverage. While individual policies vary, some of the advertised terms diverge from primary coverage in ways that are very attractive, including:
- Benefits paid directly to you (as opposed to your care providers), which means you can also use them to cover expenses related to the accident, like household bills or medical insurance deductibles.
- Network-free coverage, allowing you to choose where you receive care without agonizing over whether or not the office works with your policy.
- Guaranteed acceptance, meaning your coverage isn’t dependent on your existing health markers, like primary health insurance or critical illness coverage is.
- Additional benefits, such as death and dismemberment coverage or supplemental benefits for lodging expenses related to the accident.
Along with these enticing terms, the price of accident insurance is also pretty tempting in most cases. It’s not unheard of to see plans available for as little as $6 per month.
Of course, no matter how small the premiums may be, they’re a waste if you never need them… or if the insurance company finds ways to avoid paying out benefits in the event you do get hurt.
And one of the reasons additional insurance products, like accident insurance, are so cheap is because the benefits — and your eligibility to receive them — are pretty narrow.
Is Accident Insurance Worth It?
Unfortunately, there’s no easy answer to the is it worth it? question when it comes to accident insurance — or almost any kind of insurance, for that matter.
Whenever you purchase insurance, you’re wagering that you’re going to need the payout one day, while the insurance company is wagering that you won’t.
Accident insurance buys some consumers peace of mind, particularly if they lead a very active lifestyle. Even with traditional coverage, medical deductibles can be sky-high and major accidents can be costly. Along with the care itself, you may also have to factor in wages lost by missing work.
When you sustain a covered injury, accident insurance can help offset those costs. But you shouldn’t rely on supplemental plans exclusively. According to Policygenius, payouts for injuries like serious burns on a third or more of your body could be covered for as little as $5,000, depending on your policy; one study found the mean cost of severe burns to top $15,000 (and that was in 2011).
What’s more, accident insurance pays out its benefits on a preset schedule, whereas other types of insurance — like disability insurance, for instance — may pay out benefits on a monthly basis for up to a decade or longer.
Plus, your policy may not pay for your specific type of injury if it’s not one of the listed options. And goodness knows there are a whole lot of ways to get hurt.
Alternatives to Accident Insurance
So if accident insurance isn’t worth it in your case, which insurance products should you invest in — just in case of one of those not-so-nice surprises?
As mentioned above, disability insurance can be a more substantial and holistic type of coverage than accident insurance is, paying out up to 60% of your monthly income, and doing so at regular intervals rather than all at once. Disability insurance may also cover maladies caused by illnesses, which accident insurance generally does not.
However, disability insurance policies do have restrictions and exceptions, and one of the biggest is that you likely won’t be covered if your disability doesn’t keep you out of work. There’s also an “elimination period” to contend with, which means you may have to wait for 30 days (or up to a full year, in some cases) after injury or diagnosis to start receiving benefits.
Sometimes, it’s less yourself you’re worried about than your loved ones — particularly in a serious accident which may lead to your death. And in those cases, an accident insurance policy isn’t going to cover it; you’re probably going to want to enroll in life insurance instead.
“[Accident insurance] policies are typically attractive to the consumer, as they can be cheaper” than life insurance, said Malik S. Lee, CFP and founder of Atlanta-based Felton & Peel Wealth Management.
“But if your death does not go according to ‘plan,’ it can leave your loved ones with a huge financial need,” he said. He’s also encountered many clients who thought they had regular life insurance, only to discover they were only carrying a paltry supplemental plan.
Better Health Insurance
This one’s tough, as our health insurance options can be limited depending on where we work, how much we make and a host of other factors.
But if it’s possible for you to find a plan with better coverage — even if it means higher premiums — that may be a more effective option than endlessly tacking on these small, additional policies.
Bottom line: yes, accident insurance might buy you some peace of mind, particularly if you’re a contractor or snowboarder. And if you find a policy whose terms and price work for you, there’s no reason not to purchase it.
But as with any insurance product, this is one moment where you don’t want to just skip to the end of the terms and conditions. It’s imperative that you read the fine print so you understand exactly what your coverage terms are.
Because finding out you don’t have enough coverage at exactly the moment you need it is definitely not the good kind of surprise.
Jamie Cattanach’s work has been featured at Fodor’s, Yahoo, SELF, The Huffington Post, The Motley Fool and other outlets. Learn more at www.jamiecattanach.com.