What is Hospital Indemnity Insurance?

Daphne Mallory

Hospital indemnity insurance is a type of health coverage plan designed to cover hospital stays. Individuals who file a claim can receive a certain amount each day to spend however they choose for up to one or two years. Many plans extend coverage to spouses, children, and other dependents, and hospital indemnity policies are often used along with other insurance coverage plans to pay for the entire hospital bill owed. The plan also acts as a financial backup for some of the out-of-pocket expenses that most health care coverage plans will not cover. Patients can use the money how they see fit and are not limited by the restrictions that come with other health plans.

Hospital indemnity insurance covers hospital stays.
Hospital indemnity insurance covers hospital stays.

Coverage is often provided for intensive care unit stays, general hospitalization, and emergency treatment. Some plans will also cover stays that result from outpatient surgery. The type of hospital stay may result in a different daily benefit amount and the number of days covered. For example, a patient who is hospitalized in the intensive care unit may receive a higher amount than another patient who is hospitalized in general care. A hospital indemnity insurance plan is often flexible, allowing patients to direct payments to themselves, the hospital, or a third party.

Hospital indemnity insurance often covers intensive care unit stays and general hospitalization.
Hospital indemnity insurance often covers intensive care unit stays and general hospitalization.

Individuals can purchase hospital indemnity insurance from several sources. Health insurance companies and independent insurance brokers often sell the plans over the telephone, on the Internet, or through the mail. Many consumer and professional organizations also offer this type of indemnity insurance as part of their membership benefits. For example, the Automobile Association of America offers hospital indemnity plans to its members at group rates, which pay a daily benefit amount to policy holders for a specified period of time. Individuals who become hospitalized would submit a claim, and the benefits would be paid directly to them.

Illegal drug overdose is one example of a restriction that hospital indemnity insurance will not cover.
Illegal drug overdose is one example of a restriction that hospital indemnity insurance will not cover.

Some of the expenses that patients use their hospital indemnity insurance benefits to pay for are co-pays, deductibles, and travel to the health care facility. Plans often do not require an accounting of how the money is spent or prohibit the types of expenditures for which the plan has to pay. The restrictions often apply to the type of injury suffered. For example, most plans will not provide coverage for self-inflicted injuries that result in hospitalization, such as illegal drug overdose. Some other restrictions include injuries due to an act of war, intoxication, and while flying an aircraft.

Some plans will cover hospital stays that result from outpatient surgery.
Some plans will cover hospital stays that result from outpatient surgery.
Many hospital indemnity insurance plans extend coverage to children and other dependents.
Many hospital indemnity insurance plans extend coverage to children and other dependents.

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