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What is hospital indemnity insurance and how does it work?

What is hospital indemnity insurance and how does it work?

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What is hospital indemnity insurance? 

In short, hospital indemnity insurance is a kind of add-on insurance that can help you avoid massive financial debts, especially in times of medical emergencies.  

The American Hospital Association has stated that a whopping over 30 million people in the U.S. are hospitalized every single year, unprepared for the incurred cost. With standard health insurance in p out-of-pocket daily costs can also surprisingly cause economic constraints—to add on to it the average hospitalization cost is roughly above $10,000.  

The national bankruptcy institute has also acknowledged that medical loans and recurring costs are the top major cause of bankruptcy in the country. And the Census Bureau estimates say 20% of American households carry unpaid medical costs with the average median debt being $1,000 more. A sound Hospital indemnity can definitely help here to provide an economic safety net if you’re unfortunately hospitalized and left with massive medical bills to pay later on. 

Explaining Hospital Indemnity Insurance and its workings? 

How Does A Hospital Indemnity Work

Hospital indemnity insurance is an additional or supplemental add-on plan you can also co-purchase adding to your normal health insurance. Paying monthly premiums likewise, just as any other insurance, and if you, unfortunately, end up in the hospital, you receive a fixed benefit sum paid directly to the beneficiary to help pay off the added cost. 

An indemnity payment can be for almost anything, although people often use the money for ancillary deductibles, other insurance premiums, ambulance costs, medicines, to rehabilitate, or any additional home medical service aid costs. The cash is used for added costs that come up post recoveries like buying more groceries or babysitting costs. 

The indemnity money is sent directly to the designated person . Not like health insurance, which has contracts with providers paying money directly.  

What Does a Hospital Indemnity Insurance Basically Cover? 

What Is Covered Under Regular Indemnity Health Plan?

Hospital indemnity insurance provides a kind of direct payout based on circumstances related to hospitalizations or other medical-specific healthcare services. A typical health insurance would have certain medical specifications on covered services whereas hospital indemnity insurance is flexible and can be distributed in whatever way you need.  

However, this type of plan doesn’t have deductibles, coinsurance, or network restrictions.  

Circumstances that would most generally lead to direct payouts could be:  

  • Any Hospitalizations 
  • Need for Intensive care 
  • Need for Critical care 

Some hospital indemnity insurance policies might also cover:  

  • Outpatient surgeries 
  • Ambulance services 
  • ER visits  

A Hospital indemnity insurance policy might also cover your spouse and family.  

Now, What Doesn’t Hospital Indemnity Insurance Cover? 

What Is Not Covered Under Regular Indemnity Health Plan?

Hospital indemnity insurance simply doesn’t cover medical care like a health insurance plan would and it’s not a substitute for health insurance. So, it’s instead meant to supplement a health plan or be a sort of add-on benefit.  

Keep this in mind! 

Hospital indemnity insurance won’t also help you with regular doctor visits and tests. It is meant for more serious medical needs only, such as hospitalizations.  

All Hospital indemnity insurance policies also have certain limits, including:  

The Hospital’s daily benefits, which is a set dollar amount that could be $100 to $1,000 roughly  

  • The Hospital benefit limits for a fixed total number of days, such as 180 consecutive days 
  • Intensive care unit ICU benefits could be 200% of the daily benefit, for example 
  • Benefit reductions at a certain age can be availed such as 70  

Now, Where Can You Buy Hospital Indemnity Insurance?  

Where You Can Buy Hospital Indemnity Insurance

Insurance companies like Aflac, Allstate, MetLife, Mutual of Omaha, and Protective offer hospital indemnity insurance via employers. Fewer companies let you buy individual hospital indemnity insurance directly from them.  

Here are insurance companies that offer indemnity insurance for individuals to purchase directly:  



Colonial Life 


Now, Who Should Get a Hospital Indemnity Insurance?  

Remember Hospital indemnity insurance doesn’t replace your current medical insurance. So how do you know if you should purchase this kind of supplemental coverage? Here are a few reasons why you should consider hospital indemnity insurance in the following cases:  

  • If You suffer a chronic condition, like heart disease or diabetes, that could lead to frequent hospitalization. 
  • You have an upcoming medical procedure or surgery where a visit or stay in the hospital or inpatient treatment could be required. 
  • You’re pregnant or plan on becoming pregnant, and coverage could be provided for any additional days you stay in the hospital after childbirth. 
  • You want extra coverage in case of unpredictable accidents. 
  • You have a highly deductible health insurance plan, which has higher out-of-pocket costs. 
  • You expect to need out-of-network care and want help to pay for the extra costs. 
  • You want peace of mind and be prepared for any worst-case scenarios.  

How Much Does Hospital Indemnity Insurance In Reality Cost? 

What Is The Real Cost Of Indemnity Insurance In Usa

Any Hospital indemnity insurance can start at about a mere $10 a month for individual coverage, according to Cigna. You may pay much less if you get coverage via your employer as part of a benefits package.  

Similar to most insurance plans, costs vary based on several specification factors, including your age, location, deductibles (if applicable), insurance company, and the total coverage amount.  

You may pay much less for a hospital indemnity insurance policy if gotten through an employer. Protective offers policies via employers with coverage costs between $2 and $18 per month for a total duration of coverage that pays about $100 per day for hospitalizations. People under the age of 50 pay less than $5 per month.  

Hospital indemnity insurance plans typically provide hospital stay daily benefits that vary depending on the policy terms. You’ll have to pay higher premiums for higher daily benefits limits. An insurance company may also provide different daily benefits for intensive care ICUs, outpatient surgeries, pregnancy, and other cancer treatments.  

What to Consider the most when Buying Hospital Indemnity Insurance? 

Health Insurance

If you’re interested in purchasing hospital indemnity insurance, here’s a quick look at what to consider before selecting a plan for you or your family.  

Payment timeouts 

As you compare several hospital indemnity insurance plans, find out the payment timeline for each one. In other simpler words, how long after you’re admitted to the hospital do you receive your payout?  

The Length of the coverage 

Another factor to consider is definitely the length of coverage. A hospital indemnity insurance plan covers you for a certain fixed number of hospitalized days, which influences how much you pay for the total coverage.  

Possible length of coverage for hospital indemnity insurance includes approx.:  

  • About One day 
  • Between three and 10 days 
  • Up to 15 days 
  • Up to 30 consecutive days  

Two separate hospitalization events per year (an insurance company might consider it the same if you wound up hospital within a month of discharge)  

Make sure to read the fine print always so you know exactly what the plan’s length of coverage is. 

Indemnity insurance also usually has a waiting period before the insurance company pays you following a covered hospitalization, procedure, or treatment.  

Individual or family coverage plans 

Like your medical plan, hospital indemnity insurance can cover you and your family including, your spouse and your children. Consider the coverage that would best fit your family’s total needs if you’re purchasing a plan with keeping them in mind as well.  

Age Groups  

Hospital indemnity insurance can be purchased by people between the ages of about 18 and 65, and monthly premiums start low and increase as you age typically. These age restrictions depending on the insurance company you choose and can vary a lot.  

How to Apply for Hospital Indemnity Insurance? 

Applying for hospital indemnity insurance isn’t difficult. You can consult a licensed agent in any state or even shop online for a plan that fits your needs. Unlike health insurance, there isn’t a fixed insurance marketplace available. You can start your search by just asking your current health insurance plan provider to see if they offer hospital indemnity insurance. If not, you can often find out insurance companies or brokerages that offer auto, life, or other insurance plans that provide this type of benefit.  

Once you’ve selected a plan, using your benefits is just as easy as submitting a simple form once you’ve received qualified medical care.  

Is Hospital Indemnity Insurance Worth It? 

Benefits Of Hospital Indemnity Insurance

A supplemental hospital indemnity insurance policy can be a good solution if you’re concerned about potential health costs, especially if you expect to need medical care or have a child.  

Hospital indemnity insurance policies can also prove a wise decision for people with a highly deductible health plan that comes with large out-of-pocket costs. It can also help pay out-of-network charges, which are usually higher than in-network care.   

In these cases, hospital indemnity insurance can help out whether your existing health plan covers a portion of out-of-network care, such as a preferred provider organization (PPO) plan, with covers no out-of-network providers, such as a health maintenance organization (HMO) or exclusive provider organization (EPO) plan.  

To sum up   

Hospital indemnity insurance can surely be a way to get financial assistance and keep you from the financial doldrums that usually follow up on huge medical debts, but always remember they’re supplemental plans and aren’t a replacement for health insurance at any cost. 

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Most Asked Question

1) What is the concept of indemnity in health insurance?
The concept of indemnity in health insurance refers to the principle of providing compensation for covered medical expenses. Indemnity plans, also known as fee-for-service plans, reimburse the insured for a percentage of the total medical costs, regardless of the provider.

2) How does indemnity insurance work?
Indemnity insurance works by reimbursing policyholders for covered medical expenses. After receiving healthcare services, the insured submits a claim to the insurance company, and reimbursement is provided based on the terms of the policy, often as a percentage of the incurred expenses.

3) What is the difference between indemnity and benefit insurance?

• Indemnity Insurance: Provides reimbursement for actual expenses incurred, typically as a percentage of the total costs. Policyholders have more freedom to choose healthcare providers.

Benefit Insurance: Pays a fixed benefit amount regardless of the
actual expenses. It provides a predetermined benefit for specific
medical events, such as hospital stays or surgeries.

4) What is the limit of indemnity policy?
The limit of an indemnity policy in health insurance is the maximum amount the insurance company will pay for covered medical expenses within a specific period or for a particular condition. This limit is outlined in the policy terms.

5) What is the minimum indemnity period?
The minimum indemnity period in health insurance refers to the shortest duration for which coverage is provided. This period can vary among policies and is a crucial factor to consider when selecting health insurance coverage.

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