What is it?
Accident Insurance is an insurance product that covers larger out-of-pocket medical costs by paying the policyholder a lump sum in the event of an accidental injury.
Why is this important?
Simply put, getting hurt in the United States costs a lot of money. Accident insurance will keep you from going bankrupt if you get slapped with a huge bill from an emergency room or ambulance ride associated with an accidental injury.
How does it work?
When you get in an accident, your accident insurance will pay out a predetermined lump sum. The benefit is yours to do what you want with, but it is most often intended to assist in paying the deductible on high-deductible health plans.
Alison owns her own business selling homemade furniture online and make a yearly income of $65,000. She is healthy and rarely goes to the doctor so she buys a minimum-coverage, high-deductible health insurance policy because it is less expensive and she doesn’t need expensive coverage. On a hike Alison is bitten by a snake and she is rushed to the emergency room in an ambulance. She stays in the hospital for one day and is released home. A week later she gets a bill from her health insurance company for $14,000, or the maximum-out-of-pocket expense her plan will allow her to pay! And sees that her ambulance ride and hospital stay cost a total of $50,000! Alison files a claim with her accident insurance carrier and receives a benefit of $14,000 which she uses to pay her medical bills. Next week she makes a chair and sells it on Etsy!