Why accident insurance isn’t worth the cost

What’s happening?

The CBC reported this week that a family’s accident insurance policy won’t pay out $50,000 for 12-year-old Emily Laprise’s eye injury, sustained during a soccer match. Emily’s mom Nancy DesRosiers says she’s been paying into the policy for 12 years. Most people have some form of accidental insurance benefits either from their employer or from a credit card company.

Why won’t the insurance company pay?

Industrial Alliance pointed to a clause that says the insured person “must have a corrected visual acuity of less than 20/200” — and that is where the disagreement lies.

Emily’s vision without glasses is less than 20/200, which means what she sees — still blurry — at 20 feet, someone with 20/20 vision would be able to see 200 feet away.

The insurance giant says even though Emily only sees black in the bottom half of her vision, she can wear strong prescription glasses to eliminate blurry, double vision in the upper field, so she doesn’t qualify for coverage. “In any living benefit insurance policy—and accident insurance is one—the policies are limited by the definitions they use,” says independent insurance broker Lorne Marr. “There’s a lot of grey.”

Marr goes on to explain that there’s only two reasons a living benefit such as accident insurance won’t pay out: one, if you lie on the insurance application and two, if you don’t meet the definition exactly. “This happens a lot with critical insurance payouts as well,” says Marr. “You may have breast cancer, for instance, but you may need to specifically have Stage 4 breast cancer for the policy to pay out.”

The way Marr sees it, the family has two options. They can either sue the insurance company—Industrial Alliance—claiming Emily meets the definition. Or, Emily can be monitored and if her eyesight ever gets so bad as to meet the definition, the insurance company will pay out at that time. “Emily is still insured,” says Marr. “When and if she meets the definition exactly, the insurance company will likely pay out.”

The bottom line?

Living benefit policies like accident insurance are high profit policies for the insurance company that seldom pay out.  Even though you’ll pay very little for them, you’ll likely get next to nothing in return. “A regular disability policy is always better,” says Marr, (however, he notes that Nancy would not have been able to get that given that Emily, a 12-year-old, has no income.) “If you’re not clear on an insurance definition, try to get the definition in writing from the insurance company. And if you have a pre-existing condition, get it in writing that they will cover you for that specific illness or injury down the road if it gets worse. But for now, Nancy can seek advice from a lawyer if she’s 100% convinced she meets the definition.”

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