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What Is Accident Insurance? Everything You Need to Know (Q&A Guide)

Sarah Heckle

Senior Web Content Analyst

June 1, 2023

Is your employer offering accident insurance as part of your benefits package, or are you considering purchasing an accident policy directly from an insurance agent or broker? You may have questions about what accident insurance covers, how it works, and whether it’s worth the cost.

This helpful Q&A guide explains what accident insurance is, how accident insurance benefits are paid, what it covers, how much accident insurance typically costs, and why it can help protect you from unexpected out-of-pocket medical expenses.

Q: What is accident insurance?

Accident insurance is a type of supplemental health insurance that pays cash benefits directly to you if you suffer a covered accidental injury.

Unlike traditional health insurance, accident insurance pays a fixed cash benefit based on the type of injury or treatment received, regardless of what your major medical insurance covers.

It typically covers common accidental injuries that send you to the emergency room, urgent care or doctor’s office. Benefits vary from company to company, but many accident insurance products cover a wide range of medical services, plus specific injury benefits.

Q: How does accident insurance work?

Accident insurance is designed to supplement your primary health insurance. It pays benefits directly to you, not to your doctor or hospital.

You can use the cash benefit for:

• Medical deductibles
• Copays and coinsurance
• Lost income
• Childcare
• Transportation
• Everyday living expenses

Q: How are accident insurance benefits paid?

Accident insurance is meant to be purchased in addition to your primary policy, and it pays benefits regardless of your current plan. It’s different than major medical insurance because benefits are paid directly to you, not to doctors or hospitals. With cash in hand after an injury, you can use the money for ANY purpose, including medical bills and living expenses. Here’s how most policies work:

1. An unexpected injury happens: You’re driving to work when you’re t-boned on the driver’s side.
2. You need medical care: An ambulance takes you to the hospital. X-rays reveal you have a broken arm, plus you have a concussion and need stitches.
3. You file a claim: Your accident insurance policy pays cash benefits for your ambulance ride, emergency room services, hospital stay, medical imaging, broken bone, stitches and concussion.
4. You receive payment directly: You use the money to help cover your out-of-pocket medical bills and time off work to heal.

Q: Why do you need accident insurance if you already have Medicare or major medical insurance?

Medicare and major medical insurance that you get through work or purchase independently usually provide good coverage, but they probably leave you exposed to out-of-pocket costs, such as:

• Deductible: Before your major medical starts paying benefits, you must meet your deductible. The average annual deductible for employer-based health insurance is $2,004 for single coverage and $3,686 for family coverage.¹
• Copays: These are fixed amounts you pay for covered services after you meet your deductible. For example, a policy could have a $300 emergency room copay.
• Coinsurance: This is a percentage of covered health care costs that you must pay after your deductible is met, such as 20%. Considering that example, someone who pays 20% coinsurance would owe $2,000 after a $10,000 hospital stay.

Q: What are the odds of actually using accident insurance?

Accidental injuries are probably more common than you think. In fact, one in five Americans seek medical attention for injuries every year.²

Because accidents can happen at home, on the road, or during recreational activities, accident insurance coverage can provide financial protection beyond workplace injuries.

Q: Does workers’ compensation cover accidents?

Workers’ compensation only pays for work-related injuries or illnesses. Accident insurance helps cover injuries that occur on or off the job. Keep in mind that over 90% of all accidents in the U.S. happen outside of the workplace, at homes or in the community, where workers’ compensation doesn’t cover them.²

Q: How much does accident insurance cost?

Accident insurance premiums vary by plan and carrier, but are typically very affordable and comparable to nonessential items like coffee, fast food and cigarettes.³ Many people find accident insurance premiums to be negligible compared to the medical bills they may receive after an accidental injury.

Q: Is accident insurance worth it?

Accident insurance may be worth considering if you:

• Have a high-deductible health plan
• Have children involved in sports
• Live an active lifestyle
• Want added financial protection
• Are concerned about covering unexpected medical bills

It can help provide peace of mind by helping protect your savings when accidents happen.

Still have questions? We’re here to help!

Do you still have questions about accident insurance? For more information, call (800) 525-7662.

¹Kaiser Family Foundation, Average Annual Deductible per Enrolled Employee in Employer-Based Health Insurance for Single and Family Coverage, https://www.kff.org/other/state-indicator/average-annual-deductible-per-enrolled-employee-in-employer-based-health-insurance-for-single-and-family-coverage/?currentTimeframe=0&selectedRows=%7B%22wrapups%22:%7B%22united-states%22:%7B%7D%7D%7D&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D, 2023.
²National Safety Council, All Injuries Overview, https://injuryfacts.nsc.org/all-injuries/overview/, 2023.
³Washington National, Understanding supplemental health insurance, 2021, p. 7.