What is Hospital Indemnity and Is It Worth the Premium?

Authored by: Justin Tomlin, Independent Licensed Insurance Agent (FL Lic: W960118; GA Lic: 3760385)

Understanding Hospital Indemnity Insurance: Coverage, Payout, and Value

When navigating health insurance options, you might come across a policy called Hospital Indemnity Insurance. It sounds a bit technical, but understanding it is quite straightforward. My aim is to break down what this coverage is so you may decide if it fits your needs and within your budget.

What exactly is Hospital Indemnity Insurance?

Simply put, Hospital Indemnity Insurance is extra insurance you can purchase that pays you a fixed cash benefit in the event of a covered, inpatient hospital stay. Insurance carriers define what is "covered", but generally it is due to illness or injury. Benefits are paid in addition to any health insurance you have.

How does Hospital Indemnity Insurance differ from Primary Health Insurance?

Primary Health Insurance is comprehensive and pays for the cost of care directly to the hospital or provider, usually after you pay a deductible or coinsurance.

Hospital Indemnity Insurance is NOT comprehensive, and may pay a lump sum cash benefit directly to you (the policyholder), based on the terms of your policy, regardless of what your primary health insurance pays.

How does the payout work?

The payout structure is usually one of the following:

• A Per-Day Benefit: You receive a set amount for each day you are confined as an inpatient to a hospital, up to a maximum number of days defined by the policy.

• A Lump-Sum Benefit: You receive a set amount upon admission as an inpatient to a hospital

The cash benefit you receive is yours to use however you see fit

Why would someone need Hospital Indemnity Insurance?

For most people, a hospital stay can put a significant strain on your finances. The purpose of Hospital Indemnity Insurance is to offset these costs.

Even with great primary health insurance, you can face significant out-of-pocket costs, such as:

• Deductible and Coinsurance: You still have to meet these before your primary plan starts paying fully

• Lost Income: If you are out of work, this cash can cover rent, groceries, and childcare

• Travel and Lodging: If family members need to travel to be with you

• Non-Covered Medical Services: Paying for things like specialized medical equipment or recovery needs that your primary health insurance might not cover

Key Takeaway: Hospital Indemnity Insurance is designed to provide financial relief during a stressful time, NOT to replace your primary health insurance.

Is Hospital Indemnity Insurance worth it?

The answer, like most insurance questions, depends entirely on your personal financial situation, overall risk tolerance, and also what type of primary health insurance you currently have.

When it might be worth considering:

• You Have Primary Health Insurance with High Cost-Sharing: If meeting a large deductible, or high daily copays for hospital stays is a significant financial hurdle, this policy can act as a buffer

• You Have Limited Money in Savings: If an unexpected hospital stay could derail your monthly budget, this type of policy could help protect your finances

• You Value Financial Predictability: After a health crisis, your mindset should be on recovery, not where finances should be allocated to pay high copays

When You Might Skip It:

• Your Primary Health Insurance is Comprehensive in Nature: If your plan covers most or all of your medical costs, minus a small deductible to satisfy, you likely do not need this type of policy

• You Prefer Simplicity: If adding another insurance policy adds a level of complication to your life, or you do not see yourself filing claims or keeping up with paperwork, this policy might prove costly without much benefit for you

Next Steps: See if it fits YOUR picture

Because Hospital Indemnity Insurance policies are customizable to fit individual needs, the best way to know if this adds value, is to review your primary health insurance plan, and your own finances. As an Independent Licensed Agent, I am available for no-cost, no-obligation consultations if you would like help reviewing your current plan to see if it fits within your health needs and budget. Click here to book an appointment.

This is a solicitation for insurance. Not all plans are available in all states.

The author, Justin Tomlin, is an Independent Licensed Insurance Agent (FL Lic: W960118; GA Lic: 3760385). We are not endorsed by or affiliated with the US government or federal Medicare program. This article provides general information and does not constitute personalized medical or financial advice. Always consult with a licensed professional before making a purchase decision. Hospital Indemnity Insurance pays limited benefits only and does not qualify as Minimum Essential Coverage (MEC), as defined by the Affordable Care Act (ACA), and is not a substitute for comprehensive health coverage. Limitations and exclusions apply. Always review your policy details carefully before making a purchase decision.