Indemnity Plans for the Unforseen: Why Everyone Needs a Hospital Plan

Extra cash when you need it most

While many people have given health insurance and life insurance considerable thought, there may still be gaps in insurance coverage. Hospital indemnity plans help to fill in these gaps by providing a set amount of funds when the covered individual is hospitalized. 

The set amount may be based on a daily rate, weekly rate, monthly rate or per visit rate, depending on the plan. The amount that the insured receives is based on the plan, not on the actual amount of the hospital bills. While health insurance provides reimbursements and payment for approved medical services, these payments are made directly to the service provider. In contrast, an indemnity plan pays the amount directly to the insured. In some cases, the cash is paid as a lump-sum. The insured may designate a different person to receive the funds such as a spouse or adult child or may designate the funds to go directly to him or her. 

When people are hospitalized, there may be a number of additional expenses that pop up. They may lose income for weeks or months on end and may have difficulty otherwise making up these funds that they depend on to pay their mortgage, utilities and other household bills. A hospital indemnity plan can help cover living expenses. Additionally, it may provide the funds necessary to pay deductibles. Having a supplementary plan in place can also help pay health insurance premiums so that a person does not experience a disruption in service at the most expensive time. It is likely that when a person is hospitalized that he or she will encounter bills that are not otherwise provided for with other insurance benefits. An indemnity plan effectively supplements a person’s income when he or she needs the help most. 

Such indemnity plans kick in immediately after an insured is hospitalized. They cover a percentage of a person’s income when he or she cannot work. The benefits are paid regardless of any other insurance policy in place. Anyone who may need additional funds available in case of an emergency can benefit from such a supplementary policy.  

When determining how much coverage is necessary, it is important to consider the amount of income and expenses that a person has. Some people may feel comfortable having coverage that represents a certain percentage of their income such as 75 percent. Others may want complete income replacement, especially when there is only one income in the household. The indemnity plan serves as a financial safety net so that the insured can continue to take care of routine living expenses.