I'm evaluating options at my job for insurance and an optional insurance offering is accident insurance. I'm looking at this for my kids who play sports in school and on club teams. It's $170 a year. Curious any thoughts on benefit of this type.

We currently have a $4000 deductible so health insurance doesn't cover anything up until that point. It lists,

  • Urgent Care.$120,
  • physical therapy $500,
  • crutches, x-rays, $120,
  • Hospital admission $1,000,
  • chiropractor $250 and some others.

They pay it directly to me. Appears as a gap policy to cover some of the upfront costs prior to the deductible. I also have an HSA to cover some of the $4k.

Its through The Hartford.

  • I would ask specifically if sports injuries are covered. I would not be shocked if they were not as there is an assumption of risk that may not be considered an "accident". Same goes for other high-risk activities like skiing, skydiving, etc.
    – D Stanley
    Nov 13 '17 at 20:08
  • Aflac, right? Generally not worth it. You'd be better off putting that money into a health insurance plan with lower deductibles.
    – Rocky
    Nov 13 '17 at 20:25
  • @Rocky - I doubt $14/month is going to lower the deductible much. ;)
    – TTT
    Nov 13 '17 at 20:30
  • Its through The Hartford but yes in general the same concept.
    – Moken
    Nov 13 '17 at 20:31
  • There are many factors that could affect the decision. What's your max out of pocket (if more than $4K) and coinsurance after deductible? Is the accident insurance $170 per child, or does it cover all children, or the whole family? Are those values you listed per incident, or per year?
    – TTT
    Nov 13 '17 at 20:49

The general answer to any "is it worth it" insurance question is "no," because the insurance company is making a profit on the insurance.*

To decide if you want the insurance, you need to figure out how much you can afford to pay if something happens, how much they cover, and how badly you want to transfer your risk to them.

If you won't have trouble coming up with the $4000 deductible should you need to, then don't get this extra insurance.

* I did not mean to imply that insurance is always a bad idea or that insurance companies are cheating their customers. Please let me explain further.

When you buy any product from a business, that business is making a profit. And there is nothing wrong with that at all. They are providing a service and should be compensated for their efforts.

Insurance companies also provide a service, but unlike other types of businesses, their product is monetary. You pay them money now, and they might pay you money later. If they pay you more money then you spent, you came out ahead, and if you spend more money then they give you, it was a loss for you.

In order for the insurance company to make a profit, they need to bring in more money than they pay out. In fact, they need to bring in a lot more money then they pay out, because in addition to their profit, they have all the overhead of running a business.

As a result, on average, you will come out behind when you purchase insurance. This means that when you are on the fence about whether or not to purchase any insurance product, the default choice should be "no." On average, you are financially better off without insurance.

Now, that doesn't mean you should never buy insurance. As mentioned by commenter @xiaomy, insurance companies spread risk across all of their customers. If I am in a situation where I have a risk of financial ruin in a certain circumstance, I can eliminate that risk by purchasing insurance. For example, I have term life insurance, because if I were to pass away, it would be financially catastrophic for my family. (I'm hoping that the insurance company makes 100% profit on that deal!) I also continue to buy expensive health insurance because an unexpected medical event would be financially devastating. However, I always decline the extended warranty when I buy a $300 appliance, because I don't have any trouble coming up with another $300 in the unlikely event that it breaks, and I would rather keep the money than contribute to the profits of an insurance company unnecessarily.

In my original answer above, I pointed out how you would determine whether or not to purchase this particular insurance product. This product pays out a bunch of relatively small amounts for certain events, up to a limit of $4000. Would this $4000 be hard for you to come up with if you needed to? If so, get the insurance. But if you are like me and have an emergency fund in place to handle things like this, then you are financially better off declining this policy.

  • 4
    As an econ major I feel strongly against the first statement. Insurance companies make profit because they pool the risks, have economies of scale, have better knowledge of the experience...not necessarily because they are screwing over their customers. (They do but it's case by case.) The notion of "you make money so I must be losing" is really against the principle of modern economy. If that were true no country should be trading with each other.
    – xiaomy
    Nov 14 '17 at 14:56
  • 1
    @xiaomy I did not mean to imply that insurance companies always screw their customers, nor that insurance is always a bad idea. I have greatly expanded my answer to explain further. Nov 14 '17 at 15:32
  • 1
    I should mention tha I disagree with the implied "zero sum" view of insurance. You could easily argue that, if my premiums are used to pay for the payout and someone's commission, I'm definitely worse off financially. But there is a utilitarian aspect to this - a dollar lost hurts more than a dollar gained would make you happy, and the next dollar lost hurts even more. Hence it shouldn't be addressed as a zero-sum. Actually the some of Ben's answer focuses more on thinking about the terminal event despite its low probabilities, which is already a utilitarian way of looking at it.
    – xiaomy
    Nov 15 '17 at 17:49
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    There is generally another benefit to insurance policies like Health Insurance - in the event that you do need to pay for medical services, the cost is negotiated through the insurance company - and they tend to try to negotiate for a fair price in order to keep customers and minimize their own costs.
    – Zibbobz
    Mar 4 '19 at 17:42
  • 3
    @NuclearWang That's not true - Insurance companies act just like banks do. They make money off of investments, which means that they can reasonably charge less than they expect to pay out because they expect to make money on the investment of your premiums.
    – David Rice
    Mar 4 '19 at 17:54

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