If you have a major disruption to your life like a serious accident or a lengthy hospital stay, there are a lot of other expenses to think about besides the actual cost of your medical treatment.
Your health insurance may cover the cost of your treatment, but you will also have deductibles that need to be met, housing expenses and bills that must be paid even though you can’t work, and daily living expenses that will pile up when you’re sick like childcare or pet care. If you are like 70% of Americans with less than $1,000 in savings, a supplemental accident insurance plan can offer you financial protection if you have an unexpected injury.
What is accident insurance?
Accidents happen every day and anyone can have an accident. You could slip on a snowy step walking out of your house and fall, breaking your leg or giving yourself a concussion. Your child could break an arm falling from a tree when they’re playing in the yard. Your spouse could cut themselves badly on a broken glass in the sink. Or you could slip in the tub and injure your back. There are practically unlimited accidents that could happen to you or your loved ones on a daily basis.
Accident insurance is supplemental insurance that helps pay for the out-of-pocket expenses that you might incur if you have an accident and are injured because of it. Every year there are more than 29 million accidents that are serious enough to send someone to the doctor.¹ Household accidents can result in serious injuries like broken bones, torn ligaments, burns, deep cuts, head injuries, and even paralysis. Accident insurance pays out a set amount of money depending on your type of accident and treatment that you can use to cover expenses that your health insurance doesn’t cover. Accident insurance fills in the gaps so that your standard of living won’t fall while you recover from a serious accident.
When your medical insurance pays for medical costs or hospitalization costs directly to the medical provider and you get a bill after the insurance company has paid whatever portion of your treatment is covered by insurance. But accident insurance pays a lump sum of cash directly to you and you get to decide the best way to allocate that money. You can use it to pay medical bills or household bills or use it for things like food when you can’t work because of the injuries you have from an accident. There are typically no deductibles with accident insurance but you do pay a monthly premium. The monthly premium depends on the amount of coverage that you want and if you want coverage for just yourself or for your whole family. Premium costs for a single person can be just a few dollars a month depending on the plan you choose and the coverage amounts that you choose.
What does accident insurance cover?
If you haven’t read your health insurance policy coverage limits carefully you might be surprised at the things that your insurance doesn’t cover. There may be expenses related to an accident that traditional medical insurance won’t pay for. If you don’t have a supplemental insurance plan you could end up paying out of pocket for expenses like:
Emergency room visits
Emergency helicopter transportation
Hospital admissions and per diem charges
Intensive care and rehabilitation unit care
Many people also have deductibles that must be paid before their medical insurance will start to pay for any hospitalization or treatment. Depending on your medical insurance plan, your deductible could be thousands of dollars. The lump sum payments that you receive from accident insurance can give you the financial breathing room that you need to focus on getting better and figuring out what your next steps should be.
What is hospital indemnity insurance?
Like accident insurance, hospital indemnity insurance or hospital insurance is a supplemental type of insurance that you can get in addition to traditional medical insurance to help cover the cost of things that traditional medical insurance doesn’t pay. Hospital indemnity insurance pays cash directly to you in a set amount when you are admitted to the hospital or if you have a specific health related event. Traditional insurance will pay a predetermined portion of your treatment expenses only.
The money is sent directly to the hospital and then you receive a bill for your deductible and any expenses that weren’t covered by the insurance company. When you have hospital indemnity insurance you will receive a set cash payment that you can use for any bills you want.
Hospital insurance is a safety net that you can rely on if you end up in the hospital so that you have money to pay for housing, bills, and living expenses when you can’t work. There is usually no deductible for hospital indemnity insurance depending on the plan that you choose. There is a monthly premium fee but that fee depends on factors like how many people are covered on the policy and the amount of coverage that you want to get.
For example, if you had sudden severe pain in your side and you called emergency services who took you to the hospital in an ambulance and you were admitted to the hospital with appendicitis and had to stay there for four days your medical insurance would likely pick up the cost of your surgery and treatment. But you would have to pay the deductible and the cost of the ambulance trip as well as copays for your medications. And you would lose money for the days that you weren’t able to work. Hospital indemnity insurance would give you a set amount of money for each day that you were in the hospital and you could use that money to pay for any of those expenses.
What does hospital insurance cover?
Just like with any insurance what is covered by hospital indemnity insurance depends on the plan that you choose and the coverage options that you choose. If you have a family hospital indemnity plan that would cover hospitalizations for your children and partner as well as for yourself. In addition to specific amounts for hospital stays hospital indemnity insurance can also cover things like:
Intensive Care Unit (ICU) stays
Critical Care Unit (CCU) stays
Outpatient X-rays and laboratory procedures
Outpatient diagnostic imaging procedures
Physician office visits
Of course, plans that cover more will have higher premiums, but in general the premiums are low compared to the cost of other types of insurance.
Hospital insurance or accident insurance?
There are some ways in which hospital insurance and accident insurance overlap but a key difference is whether you go to the hospital. If you don’t go to the hospital, hospital indemnity insurance does not pay benefits. While accident insurance applies to hospital stays, you can seek treatment from your primary care doctor. If you are only going to buy one type of supplement insurance you should take the following into account:
Accidents can happen to anyone, but they’re more likely to happen if you have a certain kind of lifestyle. If you have kids that are always running and playing outside, or kids that play sports you probably should have accident insurance. If you have a senior member of the family living with you or if you are over the age of 60 you should probably have accident insurance. If you’re very active and you like to participate in activities like running, playing ball, or hiking then accident insurance might be a good thing for you have also.
Even though illness can also happen to anyone if you have a generally healthy lifestyle and you are active, fit, and make your health a priority then you might want to buy accident insurance instead of hospital insurance. If you have chronic health problems, or if you have kids who have chronic health problems, then hospital insurance might be a better choice.
Another thing to consider when you’re choosing supplemental insurance is your monthly expenses and how much money you need to get by. If you live alone and you’re relatively young without a lot of financial obligations, a basic accident insurance probably is a good fit for you so that you’re covered in an emergency. But if you have a partner and children and you own a home and you have a couple of cars, college loans, and other expenses then purchasing both supplemental insurance plans will give you the best protection.
How much money you have access to in an emergency also plays a role in which type of insurance you should buy. If you don’t have savings to cover at least three months of expenses in the bank to pay you bills in an emergency then paying a small monthly premium for accident insurance could make sense. But if you have a decent financial cushion and you think that you could cover all your expenses for a few months in the event of an accident but you would struggle to pay for big hospital costs without draining your savings then hospital insurance would make a better choice for you.
Ultimately you need to look at all of your supplemental insurance options and decide which type of supplemental insurance is right for you.
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Brought to you by The Guardian Life Insurance Company of America (Guardian), New York, NY. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, investment or medical advice. This is not dental care advice and should not be substituted for regular consultation with your dentist. If you have any concerns about your dental health, please contact your dentist's office.
Brought to you by The Guardian Life Insurance Company of America (Guardian), New York, NY. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, investment or medical advice.(exp.07/22)