Accident Insurance vs. Disability Insurance: What’s the Difference and Which One Should You Choose?

As the saying goes, accidents will happen. In fact, 2.6 million U.S. employees had accidental injuries and illnesses at work last year. The result? A lot of people missing work.

Perhaps the worst part: Having health insurance might not be enough to cover you if you get seriously injured or sick.

Having an accident or disability plan can be especially important for people who don’t work for large companies or those who are self-employed.  These plans can be part of benefits packages at bigger corporations. If that’s not you, you may want to think about buying your own.

Interested in accident or disability insurance—or both? Contact a HealthMarkets licensed insurance agent at (800) 827-9990. Visit healthmarkets.com to get started.

So what’s the difference between accident and disability insurance—and which one should you choose? Here are some answers.

Accident insurance can help cover you for many types of injuries

Each policy’s going to be a little different. Some focus more on minor injuries, like just going to the ER or urgent care, whereas others will focus on what happens if you wind up in a coma from a car wreck and you’re in the hospital for 20 days.

Some policies can even cover your children for a slightly higher cost.

Accident insurance pays you a lump sum

After you’ve had a qualifying accident, the insurance company will send you a single payment such as a check or bank deposit to cover any out-of-pocket expenses you might have because of your injury.

That money could help cover emergency treatments, hospital stays, medical exams, or transportation services. It could even be used to help pay for your living expenses.

Disability insurance can help you almost immediately after an accident or illness

Think of disability insurance as financial assistance in the event you can’t work after you’ve had a qualified accident, injury, or illness.

Say you have a motorcycle accident, get hurt, and can’t work for the next two months. “During that time, disability will help with lost wages by paying, generally, a percentage of your income,” says Yuletta Pringle. She’s an HR knowledge adviser for the Society of Human Resource Management based in Alexandria, Virginia.

Disability insurance then provides a portion of your lost income until you get back on your feet and can work again, adds Pringle. But you can’t get that money until your doctor fills out a form and sends it to your insurance company, proving that you can’t work due to your injuries or illness.

Also important to know: It may take 7 to 15 days before your plan’s benefits become effective, says Pringle. To make up for the shortfall, you’d need to use paid time off, she adds, or tap into your savings.

Accident or disability insurance could help you if you get hurt and can’t work. Find out more by contacting a HealthMarkets licensed insurance agent at (800) 827-9990. Visit healthmarkets.com to set up a call.

Disability insurance pays you when you’re hurt

Your disability pay comes either weekly or monthly and helps cover the time you’re away from work. It’s not your full income, though. It’s a percentage based on your salary, usually around 60% or 70%, says Pringle. And there’s a cap.

So if you’re earning $200,000 a year, the insurance company will likely cap you around $6,500 a month, Pringle notes. That’s the case even if that amount doesn’t quite account for 60% of your typical pay.

You can find disability insurance in two forms, short term and long term

Short-term disability policies replace a portion of your salary for a few months. About 22% of short-term disability claims are filed because of pregnancy and childbirth, while other reasons include mental illness (such as depression), hernias, back ailments, or sprains.

Long-term disability coverage, on the other hand, usually starts after that 6-to-12-month mark. “Long-term [disability insurance] is expected to be something a bit more involved, more serious,” explains Pringle. “Think of someone having an injury that results in some ongoing impairment.”

Some reasons that people file long-term claims include heart attacks, strokes, cancer, and disorders that affect the spine, back, or knees. And depending on your policy, long-term disability benefits could last for years.

So which insurance plan—accident or disability—should you choose?

“I’d say all employees could possibly benefit [from either type of plan],” says Pringle. “No one wants to expect that there would be a period they’d be under medical care and unable to work. But should that happen, knowing that there’s a safety net can help.”

Here are additional tips to keep in mind when comparing accident and disability plans:

• How much you have in savings. How long are you going to be able to go if your income were to stop tomorrow due to an injury or illness?’ The majority of Americans can’t comfortably cover 3 months of expenses.
• How high is your health insurance deductible? A lot of health plans have high deductibles—the amount you’ll have to pay before your insurance pays for the rest. So if you don’t have your full deductible amount available, it might be good to have a plan that provides income relief.
  
• Should you rely on Social Security or workers’ compensation? These two government programs can help make up for lost income, but they may not be enough. Workers’ compensation applies only to injuries or illnesses you sustain on the job. And the average Social Security disability payment was about $1,483 a month for disabled workers in January 2023.

Interested in accident or disability insurance—or both? Contact a licensed insurance agent at (800) 827-9990, or visit healthmarkets.com to get started.