What are Hospital Indemnity plans

What are Hospital Indemnity plans?

What are Hospital Indemnity Plans?

Health insurance is important but often has high deductibles and out-of-pocket costs. That’s where hospital indemnity insurance comes in. It can help cover expenses not paid by your regular health plan.

This type of supplemental insurance pays you cash benefits if you are hospitalized. But what exactly are hospital indemnity plans, and how do they work?

Explaining Hospital Indemnity Insurance

A hospital indemnity plan is extra insurance you can buy. It pays you a fixed cash amount for each day you are in the hospital.

The payment is made directly to you, not to the hospital. You can use the money however you want. This could include paying deductibles, copays, travel costs, or everyday bills.

Hospital indemnity insurance is designed to help cover costs related to hospital stays and care. It can reduce the financial strain of being hospitalized.

How Hospital Indemnity Plans Work

Most hospital indemnity insurance policies work like this:

  • You pay a monthly or annual premium
  • If you are admitted to the hospital, the benefits kick in
  • You receive a set cash payment for each day you are hospitalized
  • Benefit amounts vary but are typically $100-$600 per day
  • Payments continue for a set maximum number of days

Coverage can apply for hospital stays related to injury, illness or having a baby.

For example, if your plan pays $200 per day and you are hospitalized for 5 days, you’d receive a $1,000 cash payment.

Hospital Indemnity Plan Benefits

The primary benefit of hospital indemnity insurance is financial protection. The cash benefits can be used to pay costs related to a hospital stay, such as:

  • Health insurance deductibles and copays
  • Hospitalization coinsurance amounts
  • Travel and lodging costs for treatmen
  • Child care costs while in the hospital
  • Help with mortgage/rent payments
  • Everyday living expenses while not working

The extra money helps offset out-of-pocket costs that regular health insurance doesn’t cover. This prevents having to drain savings or go into debt.

Advantages of Hospital Indemnity Coverage

Hospital indemnity plans have several key advantages:

  1. Affordable Premiums Monthly rates are typically $20-$100 per month depending on coverage levels.
  2. Guaranteed Payments You receive the full daily benefit whenever hospitalized, regardless of actual costs.
  3. No Deductibles Unlike regular health insurance, hospital indemnity benefits have no annual deductible to meet.
  4. No Networks The plans provide benefits no matter which hospital you use. There are no network restrictions.
  5. Policy Portability You can take the plan with you even if you change jobs or health insurance.
  6. Helps Preserve Savings The extra cash benefits prevent having to drain your personal savings or retirement accounts.
  7. Peace of Mind Knowing you have added financial protection provides peace of mind against high out-of-pocket costs.

Hospital Indemnity Insurance Limitations

While there are clear advantages, hospital indemnity plans also have some limitations:

  • Benefits are limited to hospital inpatient stays only (not outpatient)
  • Lower-level benefit amounts compared to major medical insurance
  • No coverage for medical bills, doctor visits or prescriptions
  • Maximum limits on number of covered hospital days per year
  • Pre-existing conditions may be excluded for a period

Unlike major medical plans, hospital indemnity insurance has very specific coverages. But it can still provide invaluable protection against the costs of hospitalization.

How Much Do Hospital Indemnity Plans Cost?

Premiums for hospital indemnity insurance are generally affordable for the benefits provided. Costs depend on the daily cash benefit amount, age, coverage levels and options selected.

Example premium costs may include:

  • $100 Daily Benefit: $20-$50 per month
  • $200 Daily Benefit: $30-$70 per month
  • $300 Daily Benefit: $40-$100 per month

Family plans are available that can provide coverage for spouses and children at higher premium rates.

The average hospital indemnity plan ranges from $20-$80 per month for an individual. Purchasing through an employer often provides access to lower group rates.

Who Should Consider Hospital Indemnity Insurance?

Hospital indemnity plans provide the most value for those facing potentially high out-of-pocket costs related to hospital stays, such as:

  • Individuals with high-deductible health plans
  • Families to help cover deductibles and coinsurance
  • Older adults concerned about hospitalization costs
  • Self-employed individuals without employee health benefits
  • Early retirees before qualifying for Medicare
  • Those without access to comprehensive health coverage

Having hospital indemnity insurance can prevent a single hospitalization from draining savings or causing major financial strain.

For others with comprehensive health insurance and lower out-of-pocket maximums, a hospital indemnity plan may be unnecessary.

Overall, indemnity plans make most sense for those with limited budgets and exposure to potential high hospitalization costs.

What Does Hospital Indemnity Insurance Cover?

Hospital indemnity plans provide benefits only for periods when you are admitted as an inpatient to the hospital for covered conditions.

Common coverages include hospital stays resulting from:

  • Injuries and accidents
  • Sickness and illnesses
  • Having a baby/childbirth
  • Intensive care stays
  • Skilled nursing facilities

The cash benefits allow you to cover out-of-pocket medical costs and non-medical expenses like:

  • Health insurance deductible and coinsurance
  • Costs to travel for treatment
  • Child care and pet care costs
  • Rent, mortgage or utility bills
  • General living expenses

However, hospital indemnity insurance does not pay benefits for routine doctor office visits, prescription drugs, or outpatient treatments.

Additional Benefits and Riders

While the core benefit of hospital indemnity plans is the daily cash payment, many also include optional riders that expand coverage. Examples include:

  • Emergency Room Visit Benefit Rider
  • Ambulance Transport Benefit Rider
  • Outpatient Surgery Benefit Rider
  • Mental Health Benefits Rider
  • Rehabilitation Facility Benefit Rider

These additional benefits typically pay a flat amount. They increase the value of the policy but also result in higher premium costs.

Be sure to review the benefits, exclusions, and waiting periods before purchasing a hospital indemnity plan. Pay attention to lifetime and per-incident maximum benefit limits.

Applying for Indemnity Coverage

Hospital indemnity insurance is available through many insurance companies and brokers. Policies can often be purchased on an individual basis or through:

  • Employers – offered as a voluntary benefit option at work
  • Associations – available to members of professional, union and other groups
  • Government Marketplaces – indemnity plans may be an option

The application and enrollment process varies. But you generally must meet certain eligibility requirements like:

  • Minimum/maximum issue ages (often 18-80)
  • Live within the insurer’s service area
  • Answer basic health questions

Pre-existing conditions may not be covered until after a set waiting period. This ensures you don’t only sign up when knowing a hospital stay is imminent.

Is Hospital Indemnity Insurance Worth It?

With rising deductibles and out-of-pocket maximums, hospital indemnity insurance provides valuable financial protection that can fill gaps in your regular health coverage.

The daily cash benefits ensure that high costs related to hospital stays do not cripple your finances or drain savings. Plus, the payments can be used flexibly.

Even a single hospitalization could easily cost over $10,000 in out-of-pocket expenses for many people. The relatively low premiums for indemnity insurance make it an easy way to guard against these costs.

So while hospital indemnity plans don’t provide comprehensive health coverage, for many they are well worth considering as an affordable supplemental insurance option. The cash benefits provide a welcome financial safety net when the unexpected occurs.

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