What is Accident Insurance?
Accident insurance is a voluntary benefit that many employers offer their employees to help provide financial support in the event that they or a member of their family are accidentally injured.
Also called voluntary accident insurance, this type of insurance is paid out directly to the policyholder in lump sums, the amount of which is determined by a schedule outlined in the policy based on the type and severity of the injury.
For example, a sprained ankle or tendon injury will pay out at a lower set rate than a broken limb, which in turn will pay out at a lower set rate than a dismembered limb, and so on.
Those lump sums will also include pre-determined payouts for certain medical expenses incurred as a result of the injury.
Accident insurance payouts can cover expenses including, for example, diagnostics, therapies, ambulance transportation, emergency room visits, and hospital stays.
Because these claims are paid in lump sums directly to the policyholder, however, the money can be put to use wherever the policyholder believes it is most needed, whether that be contributing toward co-pays and deductibles, buying groceries, taking a vacation, or purchasing a new video game console to stay occupied while laid up and recovering for a few weeks.
Accident Insurance vs. Workers’ Compensation
Accident Insurance is not a substitute for workers’ compensation insurance, which is legally mandated for businesses who have more than a few employees in most industries.
Even in cases when workers’ compensation is in place to cover on-the-job injuries, accident insurance is often offered on an opt-in basis. In such cases, accident insurance will often pay out on claims much more quickly than workers’ comp.
As a result, voluntary accident insurance can provide stop-gap financial relief to policyholders who are injured on the job well before workers’ compensation pays out on a claim.
Furthermore, the accident insurance being discussed in this post should not be confused with occupational accident insurance, which is a type of commercial insurance typically used by small companies that do not meet the minimum requirements for legally mandated workers’ compensation coverage. These companies have the option to choose occupational accident insurance instead.
Benefits of Accident Insurance
In addition to recruitment advantages, loyalty, and the increased efficiency that robust benefits packages can create among existing employees, there are a number of additional reasons that many employers offer voluntary accident insurance as an opt-in benefit.
Cheap Premiums: The premiums for accident insurance are a great value relative to the coverage and peace of mind they can provide. Depending on the size of the payout schedules, there are policies available with $10 premiums per month or less for an individual (and only slightly more for family coverage). Further, these policies can be offered at no expense to the employer since premiums are paid entirely out of pocket by the employees, who in turn benefit from the group coverage rate.
Broad Scope of Coverage: Accident insurance policies tend to cover a fairly broad range of accident-related injuries, from minor wounds and pulled muscles to severe burns, lost limbs, and accident-induced comas. Because any of these injuries can potentially lead to time away from work, stress, and/or medical bills that may in turn lead to reduced on-the-job performance, offering accident insurance can help employees return to work at maximum productivity levels as quickly as possible. And because accident insurance can cover a policyholder’s entire family, that peace of mind extends beyond injuries that occur to the employee and policyholder in question.
Lump Sum Payments: Because the injuries and medical services that are covered are clearly defined in the policy, and because payments are made in lump sums that are paid directly to the policyholder, accident insurance tends to pay out claims more quickly than many other forms of insurance. As a result, policyholders are able to direct those resources when they are needed the most to where they are needed the most. This hastens their ability to manage the injury and reduces periods of diminished activity and productivity.
Health and Safety Incentives: In addition to providing the benefits already described in the unfortunate event of accidental injury, many accident insurance policies also have the added perk of incentivizing safe behavior and rewarding policyholders who manage to avoid accidental injuries. Many accidental insurance providers will pay out cash payments for policyholders who avoid filing for claimable injuries over a certain period of time, while other providers will increase the maximum payout per injury on an annual basis when no claims were filed. Some providers will create a “rainy day” fund to enable lump sum payouts even when a policyholder has exceeded the ‘repeat injury’ threshold outlined in their policy for a given injury. These kinds of health and safety incentives may not only somewhat decrease the likelihood of productivity-sapping accidents, but they also can increase the benefits that policyholders can expect when accidents inevitably do happen, which can further limit the negative impact that the accident has.
What’s the Difference Between a “Good” and “Bad” Accident Insurance Policy?
As with most types of insurance, a good accident insurance policy is one that is well-tailored to the policyholder’s needs, keeping risk at manageable levels without purchasing so much coverage that the premiums break the bank.
Maybe even more important, however, is that a good policy is one that is part of a well-rounded insurance portfolio - because no one single type of policy could provide optimized coverage and effectively manage the risk of adverse events on its own. To that point, with regard to accident insurance policies, these policies are often found working in conjunction with critical illness insurance policies, especially when the overall portfolio includes high-deductible traditional health insurance, for example.
When evaluating and comparing potential accident insurance policies, one thing you’ll want to consider is the breadth of each policy’s coverage. While accident insurance typically covers a pretty broad range of injuries in general, some policies may cover 50 different injuries while others may cover 100. Before signing up for any accidental insurance policy, it’s best to determine not only the number of injuries covered but also the type of injuries, to make sure your policy has a coverage range that sufficiently protects against any injuries that may be especially common in your line of business.
After considering how a particular accident insurance policy may fit within your current insurance portfolio and making sure the scope of coverage was closely hewn to your needs, the deciding factor about what makes a good policy will likely be tied to your specific company.
For instance, if you determine that the cost of premiums will be among the biggest inhibiting factors that might keep your employees from considering accident insurance, then consider letting premium price be determinative and choose a policy that keeps those costs down.
On the other hand, maybe your employees would be more responsive to a plan that doubles the claim payout amount if a policyholder’s child gets injured playing sports. Or maybe they would most appreciate a policy that rewards injury avoidance with big safety bonuses.
All of these options are possible and can significantly shape employees’ perception of your company’s insurance offerings as a whole.
The best way to ensure that your accident insurance policy is a good one that works well within the framework of your existing insurance offerings and is ideally suited to the needs of your employees is to speak with your business insurance broker and find out how accident insurance could potentially help fill some gaps in your coverage.
Top 5 Questions to Ask a Broker About Accident Insurance
What is the scope of injuries that are covered, how much is paid out for each, and how does the severity of a given injury factor into the equation?
What is the process for filing claims and how quickly are those claims typically paid out?
What is the cost of the premium payments relative to the maximum payouts for each injury on the policy schedule?
How does an accident insurance policy overlap with, conflict with, or complement my existing insurance portfolio and could my insurance portfolio be amended, revised, or supplemented to better achieve my company’s goals in some other way that doesn’t involve the addition of accident insurance to that portfolio?
What other additional benefits, safety incentives, rainy day funds, bonuses, and other features can be included to further benefit and encourage buy-in from employees, and which features best suit employee needs?
How to Find an Accident Insurance Broker
To find a broker in your area with expertise in accident insurance for your industry, search Mployer Advisor. Read real reviews, see independent ratings, and compare top-rated brokers to find the best fit for your business.
About Mployer Advisor
At Mployer Advisor, our focus is creating transparency in the insurance and insurance broker, consultant and advisor space to the advantage of the employer. Analytics is our core and we will bring to light new information, tools and resources to aid employers in making more cost-effective decisions. As a phase I, we are here to help employers find the right broker or consultant and the right insurance company for them. Giving choice and initial transparency is a first step in creating an employer centric insurance marketplace.