What is accident insurance?

Accident insurance is a type of financial product that pays out a lump sum if you incur specific kinds of injury as a result of an accident.

Zack Sigel


Zack Sigel

Zack Sigel

Managing Editor

Zack Sigel is a managing editor at Policygenius who oversees our mortgages, taxes, loans, banking, and investing verticals.

Published May 9, 2019|6 min read

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Accident insurance is a type of financial product that pays out a lump sum if you incur specific kinds of injury as a result of an accident. Similar to but legally distinct from health insurance, accident insurance complements disability insurance by allowing you to claim benefits even if the injuries you incur do not keep you out of work. Accident insurance may also complement health insurance if an accident causes you to have medical expenses that your health insurance doesn’t cover.

Accident insurance works like other types of insurance products. You periodically pay a premium and in return you receive coverage. If you are injured in one of the ways listed in the accident insurance policy, you’ll receive a benefit. Like disability insurance, many of the listed injury classes are so physically disabling that you may out of commission for a long period of time – covered injuries include everything from dislocating your wrist to becoming quadriplegic.

Where disability insurance pays you benefits each month you remain disabled, accident insurance only pays out a preset number of times or over a specific range of time. Additionally, accident insurance offers relatively low benefits: one company offers just $5,000 for incurring third-degree burns on one-third or more of your body. Compare that to disability insurance, which replaces as much as 60% of your monthly income. But the lower benefits mean you also have much lower premiums.

Read on to learn more about accident insurance:

What’s covered by accident insurance

Accident insurance pays a lump sum that can help you cover the costs associated with an injury incurred during an accident. Each accident insurance company is different, but you should learn what they cover before taking out an accident insurance policy.

Injuries are divided up into categories to better assess risk and coverage. These include

  • Dislocation

  • Laceration

  • Concussion

  • Fracture

  • Eye injury

  • Burn

  • Dental

  • Accidental death and dismemberment

Those categories are further extrapolated into more distinct types of injuries, and if your injury isn’t specifically identified as one the company covers then you won’t receive coverage for it.

Pretty much any bone that can be fractured is covered, with the severity of the fracture and the importance of the fractured bone yielding a higher accident insurance benefit. (That is, you’ll get a higher benefit for a skull fracture than a kneecap injury, which will itself be higher than a coccyx injury.) The same payout structure applies to dislocation.

For more serious conditions, such as being in a coma, you can expect a benefit as high as $10,000. Less serious conditions, like getting a laceration, may only trigger a benefit worth a few hundred dollars at most. Companies may distinguish between “basic dismemberment,” which means the accidental loss of just one limb, the sight in one eye, or the hearing in one ear, and “catastrophic dismemberment,” which means the accidental loss of at least two limbs, the sight in both eyes, and the hearing in both ears. The loss of your ability to speak is also covered by catastrophic dismemberment. These benefits reach into the tens of thousands of dollars.

The more severe the injury, the higher the payout. If you incur second-degree burns over less than 10% of your body, you could receive as little as $200. But if those burns were third-degree burns, that number jumps to $1,000. As with the severity of the injury, the magnitude of the scope of the injury matters: if more of your skin is burned, you’ll receive more money.

Accident insurance also covers the use of medical devices and accessories, such as a prosthetic limb or crutches.

Some life insurance policies come with accidental death and dismemberment riders, which pay out a benefit to the deceased’s beneficiaries if the insured died or became dismembered in an accident. Accident insurance usually has a similar death and dismemberment coverage built in that could also apply to the insured’s spouse or dependents. But accidental death and dismemberment benefits from accident insurance are considerably smaller.

Additional coverage

Your accident insurance policy may offer you optional coverage similar to the riders you find in life insurance. These include hospital stays and ambulance rides (both in a vehicle or in the air) as well as certain kinds of emergency care. Optional coverage will add to your premiums, but it may increase the number of times you can claim an injury for benefits and expand the time frame during which injuries are eligible to be claimed.

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Costs of accident insurance

Accident insurance is relatively inexpensive. You can take out a policy for between $6 and $20 per month if you’re young and healthy. However, accident insurance policies frequently have deductibles, or an amount of money you have to pay out of pocket for care before you receive the benefit to take care of the rest. Like health insurance, the more you pay in premiums, the lower your deductible will be.

Also like health insurance, higher premiums generally tend to get you better coverage. That means higher payout amounts for the same category of accident; some categories may not even be covered by the plan if your rates are too low. Check with the accident insurance company for information about what your premiums cover.

How accident insurance complements other insurance coverage

Accident insurance vs. disability insurance

Accident insurance is very similar to disability insurance in that, for both cases, the insurance company pays out when you incur an injury. In terms of what kinds of injuries are covered, accident insurance has a lot of overlap with disability insurance.

Disability insurance, however, pays out a much larger benefit – often as high as 60% of your income, which is paid out each month like a traditional paycheck, rather than a lump sum that could fall short of a thousand bucks. Disability insurance often covers disability caused by illness as well, which is not covered by accident insurance.

Accident insurance and disability insurance complement each other in two ways:

    1. You were injured, but the injury doesn’t keep you out of work, so your disability insurance company won’t pay you a benefit. Your accident insurance company may still pay you a benefit.

    1. You became disabled, but the cause of the disability isn’t one of those covered by your accident insurance policy. If it’s enough to keep you out of work, your disability insurance coverage should kick in even if your accident insurance coverage does not.

  1. You can use the accident insurance benefit as a small payment while you wait for the disability insurance elimination period to end. (You can also just use the benefit to take a vacation or buy a new TV. Go wild!)

Like disability insurance, accident insurance should pay out whether the injury was incurred on the job or off.

Accident insurance vs. health insurance

But injuries incurred while covered by accident insurance don’t need to be disabling to qualify for accident insurance benefits, so the benefit could be useful to cover small gaps in coverage from disability insurance and health insurance. You can use accident insurance to help pay down a health insurance deductible or a copay, for example.

Accident insurance can also cover unexpected medical costs that your health insurance doesn’t cover. If you incur a laceration, your health insurance will cover the hospital stay required to get stitches or sutures. But your health insurance won’t pay you any money for the injury; it’ll just pay the doctors who stitch you up. An accident insurance policy makes sure you get a few bucks, too. Although accident insurance resembles health insurance in the way that it pays benefits out for medical claims, it is not a replacement for health insurance and does not satisfy the Affordable Care Act’s health insurance coverage requirements.

Eligibility for accident insurance

Every accident insurance company has different rules about who is eligible to receive benefits. To receive accident insurance coverage, you need to be at least 18 years old. Some accident insurance companies terminate your coverage once you reach a certain age, usually between age 70 and 75.

If you want your policy to cover any dependents you have, accident insurance companies frequently limit how old dependents can be and still receive coverage. The age limit for dependent coverage is usually their late 20s.

Is accident insurance worth it?

Accident insurance is relatively inexpensive, but it also offers relatively small benefits. You might benefit from an accident insurance policy if your health insurance has high deductibles, because accident insurance offers a one-time payout that can help you afford medical care.

You’ll also benefit from accident insurance if you aren’t eligible for disability insurance, such as if you have pre-existing medical conditions that insurers don’t cover.