What is Hospital Indemnity Insurance and Do I Need It?

Many people get health insurance through their employers; in fact, a study in 2019 indicated almost half (49 percent) of Americans depend on their place of employment for health insurance.¹ Whether your health insurance is through your (or your spouse’s) work or you purchase it privately, this coverage provides important financial protection in case you have a serious accident or sickness. People who don’t have health insurance are vulnerable to falling deeply in to debt or even bankruptcy due to the high cost of health care.

People often underestimate how much medical care can cost. For example, the national average for a hospital stay is 4.5 days, at an average cost of $10,400 per day — that’s a total of $46,800.² Health insurance coverage can help protect you from high, unexpected costs like this. Most health insurance will cover a hospital stay to a certain extent, but even the best health insurance coverage will have limits. You may still find yourself responsible for costs your insurance doesn’t cover, particularly in the event of a long hospital stay or one requiring specialized treatment.

The number of people living paycheck to paycheck is estimated at 50-74%, and almost three in 10 adults say they have no emergency savings at all. One in four families making $150,000 or more a year report they depend on their next paycheck to keep their heads above water.³

What would you do if you suddenly found yourself facing a massive hospital bill? Before that happens, you might consider looking into hospital indemnity insurance.

What is hospital indemnity insurance?

Hospital indemnity insurance (also known as hospital confinement insurance or simply hospital insurance) is supplemental medical insurance coverage that pays benefits if you are hospitalized.⁴ While health insurance pays for medical services after copays, co-insurance, and deductibles are met, hospital indemnity insurance pays you if you are hospitalized, regardless of any other coverage you may have.

There is no one-size-fits-all; every hospital indemnity plan is different. Common examples of the type of benefits these plans may offer are a fixed benefit for admission to the hospital, a fixed benefit for an overnight stay, and a fixed benefit for each overnight stay in an intensive care unit.⁵ Hospital indemnity insurance policies may include other types of benefits as well. Among those are a benefit for treatment in an emergency room, and a benefit paid for certain outpatient procedures. Some hospital indemnity insurance policies may even pay a benefit for certain specified diseases or accidents, but normally people purchase separate indemnity policies (cancer, critical illness, or accident, etc.) as specialized policies offer more robust benefit amounts. ⁵

Hospital Indemnity Insurance Family Plans

Some hospital indemnity insurance policies may allow you to add family members to your policy. If you think you might want to add family members, check the terms of the policy up front to make sure you have this ability, and determine what eligibility requirements exist, waiting periods, etc.⁶

Hospital indemnity insurance is meant to supplement your medical insurance, not replace it,

so it’s as important to understand what it won’t cover as what it will. It won’t pay medical bills from your doctors or hospitals, nor will it pay for your medications from the pharmacy. You may choose to use the benefit payments you receive from a hospital indemnity policy to pay for these expenses, but the benefit payments are meant to help you fill gaps for things not paid by your medical insurance, such as deductibles and coinsurances. That said, the benefits from a hospital indemnity policy may also be used for other expenses you may have because you’re not working.

Do I need hospital indemnity insurance? Is it worth it?

Things to consider:

Knowing that your loved ones will be cared for when you are no longer here can contribute to your wellbeing now. Life insurance will never be cheaper than it is right now. Carpe diem! A licensed insurance agent can help you navigate your choices and build a plan according to your needs and budget.

• State of your health —

  how likely is it that you (or a family member) will be hospitalized?

• The comprehensiveness of your employer-provided or privately purchased health insurance —

  what gaps in coverage might be left in the event of a hospital stay?

• Your ability to cover unexpected expenses —

  do you have emergency funds available?

• Cost of the hospital indemnity plan over time —

  how much will you pay in premiums over a year or a decade vs. potential benefits you might receive?

When considering whether or not to purchase any insurance policy, it’s important to do your homework. Understand the benefits and limitations. Weigh the potential benefits with the cost and examine the various policies available. A licensed insurance professional can help you decide if a hospital indemnity policy is right for you.

1. KFF (Kaiser Family Fund), Health insurance Coverage of the Total Population (May 6, 2020)

2. Centrak, Decreasing the Patient Length of Stay (May 6, 2020)

3. MarketWatch, A shocking number of Americans are living paycheck to paycheck (May 7, 2020)

4. Nerdwallet, Open Enrollment at Work: Get Ready to Get Choosy (May 12, 2020)

5. GLG America, Is Hospital Indemnity Insurance Worth It? (May 7, 2020)

6. TMA Insurance Trust, 4 Facts You Need to Know About Hospital Indemnity Insurance (May 7, 2020)

Categories: Hospital Indemnity, Insurance, Supplement Health Insurance

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