My name is Drew Gurley and today I’m going to teach you about hospital indemnity insurance, one of the most product supplemental insurance policies available in the healthcare market.
When medical expenses arrive in the mail, they often leave you struggling to manage the unexpected out-of-pocket costs.
This is where hospital indemnity insurance becomes valuable.
A competitively priced insurance policy designed to protect your bank account during hospital stay, payable directly to you.
Whether you’ve never heard of this before or considering adding it to your existing individual or group insurance plan, you will learn more about these plans, and if it’s the right fit for you after reading this guide.
What Is Hospital Indemnity Insurance?
If you’re asking yourself, “What is hospital indemnity insurance?”, it’s the main type of supplemental health insurance that provides cash benefits for costs related to a hospital stay.
Unlike traditional medical insurance, which pays providers and hospitals directly, these types of plans pay you directly in two common ways.
- Lump sum
- Fixed benefit amount.
This money can be used for anything—medical bills, childcare, or whatever you choose based on your needs, even rent. The type of payment you receive is determined when you purchase your policy, and there are numerous variations which allows you to customize the coverage to best match your needs and the gaps in your current health insurance.
How Hospital Indemnity Insurance Works
The hospital indemnity insurance policy pays out based on specifically outlined events listed in the policy, such as a hospital admission or inpatient treatment.
Here’s how it works in real life:
- You have an accident or an unexpected medical episode and you’re admitted to the hospital. You might even have taken an ambulance to the emergency room and end up staying in the hospital for 4 days.
- Your current health insurance has a copay of $200 per day for the first 7 days you are hospitalized, so you’re on the line for $800 in this example.
- But you have a hospital policy that pays a predetermined amount per day or per event, depending on what you select on the policy form at the time of purchase. A common benefit is $250 per day, so in this instance, you can expect to be paid $1000 ($250 x 4 days.)
- After you get out of the hospital, you easily file the claim and you receive the payment directly, allowing you to handle your out-of-pocket expenses in any way you wish.
Key Features of Hospital Indemnity Insurance
- Cash Benefit Payments
Policies provide benefit payments on a per-day or per-event basis. For example, you might receive $250 per day for a hospital confinement or $1,000 for a covered accident requiring an icu stay. - Flexibility
The lump sum payout can be used for anything, such as hospital bills, transportation, or non-medical needs like groceries, it’s completely up to you. - Standalone or Group Coverage
There are multiple coverage options, you can purchase an individual policy or opt for group hospital indemnity insurance through your employer as a voluntary benefit. - Affordable Premiums
Hospital indemnity insurance is an affordable policy to add to your overall insurance coverage, in fact, the national average cost is less than $500 per year. Not too bad when you consider out-of-pocket maximums on health insurance can exceed $10,000.
Who Should Consider Hospital Indemnity Insurance?
This type of coverage is ideal for individuals in several situations:
- High-Deductible Health Plans (HDHPs): If you have significant deductibles under your health insurance plan, this policy can help cover gaps. It’s also great to paid with health insurance available through the affordable care act marketplace.
- Families with Dependents: Parents concerned about unexpected hospital stays for a family member may find this policy especially valuable. These are great policies for young kids.
- Seniors: It complements Medicare Advantage or other insurance products by covering gaps for inpatient care.
- Employees: Many companies offer hospital indemnity as part of their employee benefits package.
What Does Hospital Indemnity Insurance Cover?
While benefits vary by policy and insurance company, most hospital indemnity insurance policies cover a version of the following:
- Hospital Admission: A fixed cash benefit for entering the hospital.
- Daily Hospital Confinement: Payments for each day you’re hospitalized.
- ICU Stays: Higher payouts for stays in the intensive care unit.
- Emergency Room Visits: Coverage for emergencies leading to a hospital stay.
- Outpatient Surgery: Some plans include limited benefits for surgical procedures.
- Ambulance Rides: Many have ambulance riders which reimburse around $100 per ride within each benefit period.
What Are the Exclusions?
Like all insurance products, hospital indemnity policies have exclusions. Common ones include:
- Pre-existing conditions: Many policies have a waiting period for conditions diagnosed before the enrollment date or after specific age. Some plans are guaranteed acceptance up to age 70.
- Outpatient care not related to hospitalization.
- Routine wellness visits or check-ups, however, some plans do offer these as add-ons for wellness benefits.
Be sure to review the policy form and ask your insurance company, HR department or insurance agent about exclusions.
How Does It Work with Other Insurance?
It’s designed to work with other plans.
Hospital indemnity insurance is a supplemental health insurance plan, meaning it works alongside your existing coverage.
For example:
- If you have medical insurance with a $2,000 deductible, hospital indemnity can offset your out-of-pocket expenses.
- It complements other policies like accident insurance or critical illness coverage, ensuring you’re financially protected in multiple scenarios.
The Cost of Hospital Indemnity Insurance
Premiums vary based on factors like age and coverage level but are generally affordable—making it accessible for most American families.
On average, you might pay $10–$50 per month for individual coverage.
The national average is less than $500 per year for a policy that pays anywhere from 100-300 per day based on age and benefit period. As stated earlier, there are many ways to customize these plans, but they are all relatively affordable in most instances.
Real-Life Example: How It Helps
Let’s say you live in New York and experience a sudden hospital admission after an emergency:
- Your health insurance has a $1,500 deductible and $300 daily copays.
- Your hospital indemnity policy pays $500 for the admission and $300 per day for a three-day hospital confinement.
- Total benefit payments: $1,400 which enough to cover your out-of-pocket costs with some left for additional hospital expenses or whatever you may choose to pay for.
How to Buy Hospital Indemnity Insurance
- Insurance Agents: Work with a professional to ensure your policy fits into your overall health coverage strategy.
- Employer-Sponsored Plans: Check if your company offers group hospital indemnity insurance. It’s common that is employers offer group life insurance, they likely also offer hospital indemnity insurance plans too.
- Direct Purchase: Some insurers offer customizable policies online.
FAQs About Hospital Indemnity Insurance
Does it cover pre-existing conditions?
Most policies have a waiting period for pre-existing conditions, but some policies will still allow you to purchase if you have certain pre-existing conditions. You should always review the complete details to make sure you are eligible.
Is it worth it for seniors?
Absolutely.
Hospital indemnity coverage complements Medicare Advantage by addressing out-of-pocket costs like copays and deductibles for hospital stays.
We firmly believe that every Medicare Advantage plan should be paired with a hospital indemnity benefit.
What’s the difference between hospital indemnity and medical insurance?
Hospital indemnity provides cash benefits directly to you and it’s designed to match the gaps in your current health insurance,
Medical insurance pays your providers, hospitals and facilities directly and bills you for your contractually agreed upon copays, coinsurance and deductibles.
Conclusion: Protect Your Wallet with Hospital Indemnity Insurance
Whether you’re managing out-of-pocket expenses or planning for unexpected hospital bills, hospital indemnity insurance is a practical and affordable supplemental plan.
By understanding how hospital indemnity insurance works and tailoring it to supplement your specific health insurance plan, you can fell better that when you have a medical claim, you won’t be left to pay out of pocket.
For more information or to get a personalized quote, contact us and we’ll connect you with an insurance agent.