How Accident and Disability Insurance Differ
Accident insurance and disability insurance might sound similar, but they have different, though complementary objectives.
Accident insurance pays a lump sum if you incur a specific kind of injury. Disability insurance pays you a monthly sum if you become disabled. Short-term disability benefits usually last 13 or 26 weeks, while long-term disability benefits can last the duration of the illness or injury.
Accident insurance complements disability insurance by allowing you to claim benefits even if the injuries you incur do not keep you from working. For example, if you have both types of coverage and you fall and break your arm, you could receive a one-time accident insurance cash payment to help with treatment costs as well as weekly replacement income from the disability coverage if you are unable to work.
Accident insurance pays a set number of times for the types of accidents listed in the policy. The types of accidents covered depend on the insurance company's policy schedule of benefits, so it's important to make sure you understand exactly what types of accidents or injuries are covered. The categories covered usually include dislocation, laceration, concussion, fracture, eye injury, burns, dental and accidental death and dismemberment. Particular types of injuries are covered under each category. If your injury isn't listed, the insurance company won't cover it.
This type of policy can be particularly helpful if you have a High Deductible Health Plan (HDHP). An accident insurance payment can help with out-of-pocket expenses for emergency room fees or out-patient visits.
A downside to accident insurance is that, while the premiums are low, benefits are also lower compared to disability coverage. For instance, an accident policy might pay a $5,000 benefit for third-degree burns on one-third or more of the policyholder's body; however, a disability policy would pay out 60 percent of the policyholder's monthly income.
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