Private Accident Insurance – Superfluous Or Sensible?Policy Types
Every year there are about 9 million accidents in the US. Should you take out private accident insurance to protect yourself?
Here are some facts to keep in mind:
- In more than 90% of all cases, people become unable to work due to illness, not after an accident. And accident insurance does not help with the affects of an illness.
- There are also better insurances for other risks than accident insurance – for example, a sickness benefit insurance.
- Accident insurance can be an important insurance cover for people with a high accident risk – but then it often costs more.
What kind of insurance is offered for an accident?
Insurance companies define an accident as follows:
“An accident is when the insured person involuntarily suffers damage to his or her health as a result of a sudden external event affecting his or her body.”
- “Sudden” means that the event must have occurred within a relatively short period of time. Damage to health caused, for example, by continuous stress in sports does not constitute an accident. Pathological disorders resulting from psychological reactions (annoyance, excitement, shock) are also not covered.
- “Acting on the body from outside” means that forces are required which act on the body, such as collisions in road traffic or injuries caused by falling objects.
- “Unintentional” means that the accident was not self-inflicted. Suicide or self-mutilation are therefore not covered by the insurance. However, anyone who has acted with gross negligence is insured.
Damage to limbs or the spinal column after great exertion of force is also considered an accident by the insurers. The prerequisite is that a joint is dislocated or muscles, tendons, ligaments or capsules are pulled or torn. Normal movements of daily life are not sufficient.
You must prove to the insurer that you have suffered an accident according to these criteria.
Private accident insurance covers all accidents of daily life – i.e. both in your leisure time and at work. The protection applies worldwide.
Who needs accident insurance?
Private accident insurance is particularly important for self-employed persons, persons without a profession, housewives and househusbands, for persons with a very high accident risk and for employed persons with previous illnesses who cannot take out occupational disability insurance.
For other groups of people it is less useful:
- Employees are already covered for accidents at work and on the way to and from work and for occupational diseases. This is a compulsory insurance, which the employer must take out and pay for you as an employee through the employers’ liability insurance association. A private accident insurance does not improve your protection during work.
- Children and young people also have insurance coverage in kindergarten, school and university. The outward and return journey is also insured.
However, there is no insurance cover for leisure time, household, road traffic and holidays. Those who want to be covered here can consider taking out private accident insurance.
However, it is important to note that many risks covered by an accident insurance can be covered more comprehensively and more cost-effectively with other insurance policies. Therefore, if you are considering accident insurance, be sure to look around for other insurance policies and inform yourself before taking out insurance.
- For most people, occupational disability insurance is much more important than accident insurance. This also applies if you become unable to work due to an illness, not just an accident.
- Daily sickness benefit insurance also helps in the event of loss of earnings, not only in the event of an accident.
- You can cover your own death and the care of your descendants better with term life insurance.
Private accident insurance distinguishes between two groups of risks:
- In hazard group A, the risks with a low accident risk are covered. These are persons with commercial or administrative activities. Women are assigned to this hazard group in most companies.
- In hazard group B, persons who perform physical or manual work are included. If you end up in this group, it usually means that you have to pay a higher insurance premium.
What benefits can be insured?
The most important benefit of accident insurance is the payment of a one-off sum of money, the disability benefit. The prerequisite is a “permanent impairment of physical or mental performance”. This is the case if the consequences of the accident are expected to last longer than three years and no improvement is to be expected.
The amount of compensation depends on the degree of disability that has occurred. The accident insurance pays a percentage of the agreed sum insured. It depends on how the loss of the body part is taken into account in your insurance contract.
A few examples from the most common dismemberment schedule:
- one arm in the shoulder joint: 70 percent
- one leg up to the middle of the thigh: 60 percent
- one hand in the wrist: 55 percent
- one eye: 50 percent
- hearing in one ear: 30 percent
- the sense of smell: 10 percent
For example, if you have taken out a contract with an insured sum of 300,000 euros and you lose an eye in an accident, you will receive 150,000 euros as a disability payment. In the event of partial loss or partial functional incapacity, the values are reduced accordingly.
For certain professional groups such as musicians, surgeons or hairdressers there are tariffs with their own articulated taxis. Individual parts of the body can be insured much better.
Important additional accident insurance benefits
Make sure that costs for search, rescue or recovery operations are insured. The insurer should also pay for cosmetic operations caused by accidents.
Benefits not required under accident insurance
Often, the risk of death is automatically covered. However, this only applies in the event of accidental death. If, for example, you need a provision for death to protect relatives, you should think about taking out term life insurance.
Further benefits can be agreed depending on the tariff. These include, for example, a daily sickness allowance, daily hospital allowance with and without convalescence benefit and transitional benefits. This additional protection is either superfluous or can be better secured by other contracts. For example, you can better insure against loss of earnings through private daily sickness benefit insurance. Then you will receive benefits not only after an accident, but also in the event of illness.
It is also possible to arrange an accident pension with the accident insurance company. However, this variant is less recommendable, as the pension payment often only starts from a degree of disability of 50 percent and is also very expensive. Daily sickness allowance or occupational disability insurance are better suited to compensate for loss of income due to an accident. In these two cases, you will also receive money if you are ill.
The agreement of a dynamic is not necessary. The insured sums are then usually increased by an agreed fixed percentage.
The premiums increase accordingly. It is better to choose high sums insured at the beginning of the contract. When you are young, the gaps in coverage are large and you would need as much money as possible from the insurance company after an accident. With increasing age, however, you will have higher pension and benefit entitlements and therefore need less money from the accident insurance company.
Be careful with an accident insurance with premium refund: Here, usually completely overpriced accident insurance policies are coupled with a poorly interest-bearing savings plan. You should always take out insurance for risks on the one hand and contracts with which you want to save money on the other hand separately.
Special tariffs with higher benefits for serious accidents
If you want to insure yourself at a particularly high level, you could of course increase the sum insured accordingly. Instead, many insurers offer models to insure at least severe impairments at a higher level. But this has both advantages and disadvantages.
- It is usually cheaper to choose such tariffs instead of increasing the sum insured significantly.
- However, in many accidents you will not achieve the necessary disability for higher payments.
As a result, you will pay higher premiums for the insurance, but it will rarely cover higher payments.
Most accidents are not so serious that you will actually benefit from such tariffs. So if you are thinking of concluding such contracts, be sure to seek independent advice, for example from your consumer advice centre.
What should you look out for?
When applying for accident insurance, you must answer the questions about your state of health completely and truthfully, otherwise your insurance coverage is at risk.
The tariff level and premium depend on the risk to be insured (profession, hobbies etc.). You must therefore inform the insurer immediately of any change in your profession or hobbies.
In the event of an accident, you must observe deadlines. Otherwise your insurance cover is at risk. The deadlines can vary among insurers. In your own interest, take a look at your insurance conditions.
How much insurance should be taken out? A common rule of thumb for determining a sufficient basic sum for disability is based on age and income:
- 30 years = six times the gross annual income
- 40 years = five times the gross annual income
- 50 years = four times the gross annual income