The difference between excess and primary insurance
Excess Accident insurance is superior to primary insurance for Accident insurance policies for sports and recreation organizations such as teams, leagues, camps, and recreation departments. This is especially true if the purpose of the Accident policy is to cover moderate to serious injuries.
Excess Accident insurance is also known as secondary insurance. Excess Accident insurance requires other collectible insurance such as family health insurance to respond first. As a result, the typical case involves initial payment by the family health carrier less any deductible and coinsurance. The Excess Accident policy should provide payment for such deductible or coinsurance so that the injured participant or parent incurs no out of pocket expenses.
There should be a coordination of benefits between the two policies so that the injured party does not owe a debt to the medical service providers. If a debt is not owed, there will be no dunning letters or calls from collection agencies and as a result there will be little need for the injured party to visit an attorney.
Also, due to the coordination with existing family health insurance, an Excess Accident policy will be much less expensive than a Primary Accident policy.
On the other hand, Primary Accident insurance pays without regard to other collectible insurance. For this reason, Primary Accident insurance is generally unaffordable. In order to make it more affordable, the insurance carriers that sell Primary Accident insurance will water down the payout by either selling medical limits less than $25,000 or by inserting internal payout limitations which are also known as allocated benefits or sublimits. See prior blog posting on Internal Payout Limitations under Accident Insurance for a description of how they significantly reduce payouts.
The use of either reduced medical limits under $25,000 or internal payout limitations under Primary Accident insurance will result in only a partial payment in the event of a moderate to serious injury.
Partial payouts can result in lawsuits by injured parties in search of a deep pocket. This is bad news for sports organizations and their directors, officers, employees and volunteers. Therefore, high limit Excess Accident insurance that does not contain internal payout limitations is far superior to low limit Primary Accident insurance that contains internal payout limitations.