What is Indemnity Cover?

Daphne Mallory

Indemnity cover is insurance that pays out claims for damages or refers to a fee for a service health care plan. A policy holder can often expect the insurance company to pay the other party up to the policy amount. Insurance companies provide legal representation to policy holders that may include a full legal defense at trial or legal settlement. Health insurance policy holders with indemnity cover receive payments from the insurance company in the form of reimbursement. The insured has to pay out of pocket for health care and submit a claim after the fact to get reimbursed for some or all of the costs.

Health insurance indemnity cover often includes out-of-pocket copays at each appointment.
Health insurance indemnity cover often includes out-of-pocket copays at each appointment.

The goal of indemnity cover is to provide legal representation and compensation on behalf of the insured in cases where they are at fault. A common reason for the fault is often negligence. Another party often claims that the insured acted in a negligent way that resulted in the party suffering damages. The insurance company pays for those damages up to the policy amount. For example, if the damage claims amount to $500,000 US Dollars (USD) and the policy amount is $400,000 USD, then the insured would have to pay the difference.

There are different types of indemnity policies, and each serves a different purpose. Professional indemnity cover protects financial advisors, attorneys, and other professionals from liability lawsuits where the insured is accused of providing negligent services or committing errors. Auto indemnity insurance is coverage for motorists who are accused of operating a car in a negligent manner, which includes representation in court and payment to victims up to the coverage amount. Builder’s indemnity cover, which most home builders purchase, protects home owners from defective work or projects that builders don’t complete. Mortgage indemnity cover offers protection to lenders in the event that borrowers default on their mortgages.

Health indemnity insurance often pays up the maximum benefits allowed by the policy. An insured person could face health care costs that exceed the policy amount, unlike with managed plans where the entire eligible costs are often paid for. The insured can choose which medical provider to see for services and is often not restricted to a list of providers who are a part of the insurance company’s network. The insurance company pays the reasonable costs for services, often regardless of which provider the insured goes to for services. Policy holders often have to pay a deductible for health indemnity cover as well as co-pays, and the insurance company takes both types of payments into account prior to making reimbursements.

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