Monday, February 29, 2016

The Definitive Guide to Accident Insurance

Accident insurance pays cash directly to the insured in the event of a covered accident. These payments can help offset the costs of out of pocket expenses for deductibles, co-payments, co-insurance, other related expenses or be used to pay everyday expenses. Since the money is paid directly to the insured, it's really their decision on how it is used.

RESOURCE: This guide is a part of my larger guide called The Definitive Guide to Workplace Benefits. Be sure to check it out.

A base accident policy only pays in the event of an accident. It will not pay any amount for sickness or illness. If you have a cold or flu and go to the doctor or emergency room, you won't receive any payment from the insurance company. However, if you break your arm because of an unexpected fall, that most likely will be a covered accident and you could receive payment.

What Is The Purpose Of An Accident Insurance Policy

Just like a critical illness insurance policy, an accident policy's purpose is to help pay for things things that your medical insurance might not cover if you have an accident. Over the years, deductibles, co-payments and co-insurance amounts required to be paid by policyholders have risen dramatically. It's not unusual for health insurance plans to have a $5,000 individual deductible or a $10,000 family deductible on top of premiums, co-payments and co-insurance.

As these out of pocket costs have risen, the need for supplemental coverage like accident insurance has increased to help provide cash to pay for those expenses.

Keep in mind, an accident policy is not set up to reimburse you for actual costs incurred. It's set up to only pay a specified amount as outlined in the policy. It's possible the actual cost of your injury could be higher or lower that your actual costs.

It's also not meant to provide you an income if you are off work and not getting paid due to being disabled because of your accident. That's the purpose of disability income insurance.

Specific Injuries An Accident Insurance Policy Might Cover

Depending on the insurance company, an accident policy will cover a wide range of injuries. Here's a sample list of the types of injuries you might see covered.

  • Paralysis
  • Torn knee cartilage
  • Ruptured disc
  • Tendon
  • Ligament
  • Rotator cuff
  • Fractures
  • Dislocations
  • Burns
  • Coma
  • Concussion
  • Lacerations
  • Eye injury
  • Dental injury
  • Death
  • Dismemberment

NOTE: One thing I didn't quite know until I started working with accident policies is what the terms closed reduction and open reduction meant with regard to fractures. The difference between the two are that a fracture that doesn't require surgery is a "closed reduction" and one that does require surgery is called an "open reduction". Accident policies sometime pay more for fractures that require surgery.

Types of Care Covered Under An Accident Insurance Policy

Benefits are payable under an accident insurance policy for covered accidents and also for care related to those accidents. You can break down this care into four basic categories. Those are:

  • Initial care Initial care benefits due to a an accident could include an emergency room treatment, a physicians doctor's visit, ambulance or diagnostic screenings benefit.
  • Hospital care Hospital care could include being admitted to the hospital, admitted to an intensive care unit, having surgery or rehabilitation.
  • Follow-up care Follow-up care could include medical appliances, physical therapy, prosthetics
  • Transportation benefits If you have an accident away from home, certain transportation and lodging payments might be made.

Who You Can Cover

You can typically cover you and your immediate family under an accident policy. That would include:

  • Employee
  • Spouse
  • Children

Are You Getting 24 Hour Coverage or Off the Job Only Coverage

An important part of an accident insurance policy is whether it covers you 24 hours a day for accidents that happen on or off the job. Many policies are set up to only provide benefits if you have an accident off the job. If you have an accident that occurs at work with off the job only coverage it would not pay.

Many employers choose to offer accident policies that are off the job only.

The thinking here is that workers' compensation will pick up the tab for on the job accidents. However, I know people who have had to use workers' compensation and they were not that thrilled with how an injury at work was dealt with in their personal situation.

In addition to that, companies decide to set up accident insurance policies to exclude on the job accidents I guess to prevent employee's engineering accidents to take time off or to abuse the policy. It's an attempt to police what someone may or may not do because they have an accident policy.

In spite of that, I am a big believer in accident policies that provide 24 hour coverage if the employer group qualifies for it.

Since 100 percent of the premiums are usually paid for by the employee and the cost for the 24 hour coverage is not that much higher than off the job only coverage, I believe that every accident policy offered at work should provide 24 hour accident insurance coverage because it's the employee's dollars at work here.

I feel insurance policies have enough exclusions and encourage every company to offer 24 hour coverage in all cases and you have an employee abusing their time off to deal with that directly.

Be sure and check your specific plan to be sure it has 24 hour coverage.

Guaranteed Issue

Accident insurance is issued on a guaranteed issue basis because it doesn't pay medical benefits in the event of sickness. It only pays benefits in the event of a covered accident. As such, accident insurance is guaranteed issue.

Is My Policy Portable?

    Most policies are portable. How portable they are depend on whether they are written as individual policies are as group policies. Some policies have to be kept for a certain length of time in order to take them with you. Some last for life and others not. It really depends on the insurance company.

    In The End Always Read Your Policy (For Exclusions)

    As always you must read your policy. Some have little restrictions in them that prevent payments you might have thought you were due. The 24 hour coverage and off the job only restriction above is another example. Then there are the obvious exclusions like self-inflicted injuries or an act of war. But you also have to watch for other fine print that exclude injuries that might happen out of the country as an example.

    So again, always read your specific policy to get completely familiar with how your plan works.

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    Michael is a champion of guaranteed issue for employees in the workplace. He's been an insurance agent since 1992 and has worked with thousands of employees.