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Accident insurance – what you should know

Joanna Robinson 10th May 2023 One Comment

Reading Time: 4 minutes

The very thought of dying  or being seriously injured and leaving your loved ones to bear the financial burden is enough to make anyone think about getting accident insurance. But whilst accident insurance may sound similar to critical illness insurance, it is in fact a completely different kettle of fish.


What is it?

accident insuranceAre you the sort of person who would buy train insurance if you could? Then you might be interested in accident insurance. Personal accident insurance is designed to help protect against the often serious financial problems you can face after an accident – road traffic accidents, workplace accidents and serious injury. It can cover you and your children, which is great for clumsy and curious youngsters. However, whilst the policy can be extended to a spouse and children, the payouts are often lower.

Depending on the level of cover you choose, you could receive £500,000 cash for a permanent disability in a claim, although payments vary from insurer to insurer. This also depends on the type of disability. They way payments are given also varies as some insurers will make payments weekly for one or two years where as others will provide a lump sum.

The premiums generally cost around the £5–20 a month and they don’t go up with age (nor do the payouts).

Personal accident insurance is often already rolled into other policies such as travel, car and even home insurance. Sometimes it’s an extra feature on credit cards too. It can be a standalone insurance policy or come as a package with others.


Do I need it?

If you ski then you should buy accident insurance because the odds of breaking your leg are quite high. If your lifestyle is unadventurous the chances of having a bad accident are fairly small, so really think if you need to part with your hard-earned cash for this type of insurance – there could be other policies more suited to your lifestyle. Like most insurance policies, it seems like a good idea to take it out, however you should really assess whether or not you need it.accident insurance

The odds go up with age, although insurance companies will take on people without a medical until their 75th birthday. After that you need to be tested.

Insurers will sell personal accident cover to UK residents aged 18–69. If you’re prepared to spend around £50-60 a year on this sort of cover, it certainly could be very consoling if you’re unlucky enough to suffer a permanent disability through an accident. The odds are you won’t, though, so buying accident insurance could be described as more of an odd form of wishful thinking than sense.


What am I covered for?

The thought of your death or injury after a serious accident leaving your family with pending financial doom is enough to tempt you into getting this type of insurance. And with tax-free payouts edging towards £500,000 it seems like a good idea.accident insurance

Standard areas of cover include death, permanent total disablement and the loss of – or use of – a limb. Some policies will cover partial disablement.

The tax-free lump sum is dished out if the policyholder becomes seriously injured e.g. has an accident resulting in the loss of one or more limbs, one or both eyes, use in either limbs or eyes or some other form of disability.


How do I get the best deal?

accident insuranceAccident insurance is very popular so unlike with other types of insurance it should be relatively simple to secure a good deal.

You have to read the small print to make sure you don’t get fobbed off with this kind of insurance as it often comes as a freebie with some other insurance packages. For example, some policies won’t compensate if there was any wilful exposure to danger. This could mean ignoring a warning red flag against choppy seas and deciding to swim and then drowning.

Other insurers might not pay if you suffered an accident as a result of riding or being a passenger in a motorcycle accident, or if you had an accident after taking part in an adventure sport such as rock climbing, mountaineering or paragliding.


How is this different from other insurance policies?

Whilst it might come across as very similar to life and critical illness policies by paying out in the event of your death, unlike life cover this type of insurance does not typically pay out if you die from an illness or natural causes.

If you’re looking for protection against sickness or general disability, other forms of insurance may be more appropriate.

Personal accident policies are ‘non-indemnity’ insurance contracts. This means they can’t restore the policy holder to the position they were in before by simply paying out a financial benefit in case of death or bodily disfigurement. They do not compensate for loss of earnings or incapacity – there’s another form of insurance for this which is called payment protection insurance (PPI).

However, should you wish to take out PPI you’ll need to check that you meet the requirements and are eligible to make a claim. For years many people were mis-sold PPI under false pretences so make sure you’re getting exactly what you want from a PPI policy.


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Tom Conner
Tom Conner
10 years ago

I think you’re spot on with this. Personal accident cover is really cheap because the chances of suffering a condition needed to get a payout is really small. I worry that people take this out and it gives them a false sense of security. Rather than PPI or critical illness cover, I think income protection is the ideal policy as it covers any illness or injury that prevents someone from working and it can pay out long-term, rather than just 12 months typically with PPI.

Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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