Hospital insurance, whether it is purchased privately or through your (or your spouse’s) employer, offers crucial financial security in the event that you experience a major accident or illness. Care for these types of events can be incredibly expensive, so if you don’t have insurance, you run the risk of going bankrupt or heavily into debt.
What Is Hospital Insurance?
Hospital insurance, also referred to as hospital confinement insurance or hospital indemnity insurance, is a supplemental form of medical insurance that provides benefits in the event that you end up in the hospital. Hospital indemnity insurance pays you a fixed benefit amount if you are hospitalized no matter what other coverage you may have, whereas health insurance only pays for medical treatments if copays, coinsurance, and deductibles are reached.
What is Covered?
There is no one hospital indemnity plan that fits everyone; they are all unique. But typical benefits that these plans might provide include fixed benefits for hospital admission, overnight stays in the hospital in general, and overnight stays in an intensive care unit.
The main objective of hospital indemnity insurance is to lessen your financial obligation for major medical costs. In light of this, a hospital indemnity policy is useful for helping to pay for:
- Inpatient hospital stays
- Emergency room visits
- Ground transportation by ambulance, or air transportation by helicopter
- Surgery and anesthesia
- A select number of doctor visits
Hospital indemnity insurance also offers several other advantages, including benefits paid for certain outpatient services and treatment in the emergency room. Some hospital indemnity insurance policies may even pay a benefit for certain specified diseases or accidents. But most people obtain separate indemnity plans (cancer, critical illness, accident, etc.) for other situations requiring hospitalization, as these specialized policies give more substantial benefit amounts.
Who Needs Hospital Insurance?
When deciding if you need hospital insurance, there are some things you should consider, including:
- The state of your health – How likely is it that you (or a member of your family) will end up in the hospital?
- The comprehensiveness of your employer-provided or privately purchased health insurance – What possible coverage gaps could there be in the event of a hospital stay?
- Your ability to cover unexpected expenses – Do you have money set aside for emergencies?
- Cost of the hospital indemnity plan over time – How much in premiums will you pay over the course of a year or a decade compared to any potential benefits?
How Much Does It Cost?
The price of hospital indemnity insurance varies widely. The cost will differ depending on the extent of coverage, the benefit amount, the inclusion of dependents, and whether you purchase an individual or group policy. It is possible to spend as little as $7 every month or as much as $463.
How Much Does Hospital Indemnity Insurance Pay Out?
How long you stay in the hospital often determines the policy benefit. For instance, if you stay in the hospital for three days, a policy that pays $250 a day will provide you a lump sum payment of $750. There can be a cap on the number of days the insurance will cover. For instance, you could have a 30-day cap on benefits.
Some policies offer an initial confinement benefit. This is the amount you would receive simply for the hospital admitting you. For instance, if your initial confinement benefit in the example above is $500, your total benefit would be $1,250.
When it comes to hospital insurance, it’s important to keep in mind that it is a type of “fixed” indemnity plan – and it is named so for a reason. For example, imagine that you experience a minor accident that necessitates a trip to the doctor. No matter how much the visit would cost, your fixed indemnity plan might cover only $100 of it.
Therefore, if your doctor only charges $99 for the office visit, you profit by $1. But a well-known clinic may charge $315 for an office visit. In this case, you’d still only get a $100 reimbursement for the visit. So it’s critical to know how much you’ll owe before making an appointment.
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Hospital Indemnity Insurance Vs. Traditional Health Insurance
Hospital indemnity health insurance does not qualify as major medical insurance under the Affordable Care Act (ACA). Five things set hospital indemnity health insurance apart from major medical insurance:
- No network restrictions – You can choose any physician and any facility to receive treatment because hospital indemnity plans pay you a set amount for all medical procedures. Additionally, there is no requirement that your indemnity plan and major medical coverage be coordinated, so you don’t need referrals.
- No deductible – A deductible must be met in order for your typical health insurance plan to start covering your medical expenses. But hospital indemnity insurance policies immediately pay their fixed amount for your medical services. In other words, your hospital indemnity coverage can fill in the deductible gap.
- No coinsurance – Major medical insurance policies require that you pay coinsurance percentages in addition to meeting your deductible. You still have to pay a portion of your medical expenditures after you’ve met your deductible. This amount is often between 20 and 30% of the remaining balance. But you can use your fixed benefit amount to pay the coinsurance cost if you have hospital indemnity insurance, which is exempt from this provision.
- It’s your money – If you purchase a hospital indemnity plan, your insurance provider will directly pay you a certain amount to cover your medical expenses. You can also use the funds to supplement your income and pay for childcare. Or pay for any other expenses incurred while you are hurt or unwell.
Hospital Indemnity Vs. Other Supplemental Insurance
Similar to other supplemental insurance plans, hospital indemnity insurance has several important distinctions in what it will and will not cover. The following types of supplemental insurance policies differ in the following ways:
- Critical illness insurance – Critical illness insurance pays a lump payment if you are eligible for benefits, similar to hospital indemnity insurance. You can use the money for anything you choose. But critical illness insurance only covers a select group of illnesses. This includes cancer, heart disease, stroke, and organ damage, including organ transplants. Typically, chronic diseases like diabetes do not have any associated costs covered by critical illness insurance. Additionally, this type of plan won’t protect you if a serious injury sends you to the hospital. Furthermore, not all critical illness insurance plans will now include coverage for COVID-19 and other infectious diseases. Despite some of them being previously modified to do so.
- Accident insurance – Different from other types of supplemental insurance, accident insurance provides a lump sum payment in the event that you sustain a specific type of injury as the result of an accident. Dislocations, lacerations, concussions, burns, and other severe injuries may have coverage. The diagnosis and extent of your injury, the course of treatment, and the kind of coverage you have all affect the benefit amount you get. Accident policies don’t typically cover injury that occurs due to a disease. Therefore, an accident policy would not be of assistance to you if you were in the ICU for COVID-19, for example.
- Disability insurance – This policy, often known as disability income protection insurance or just disability insurance, compensates you for a portion of your lost income in the event that you are unable to work as a result of an illness or injury. Consider it insurance for your most valuable asset: your ability to earn money.
Any medical costs incurred as a result of a sickness or injury are not covered by disability insurance directly. However, whatever money you receive in benefits from your disability insurance coverage can go towards your medical bills. Because it replaces lost income. After all, you can use your money however you like.
What To Keep In Mind When Buying Hospital Insurance.
If you’re shopping for a hospital indemnity plan, there’s a few things you’ll want to consider:
- Payout time – This is how long after you’ve been to the hospital you will have to wait before you receive your reimbursement. This time frame will vary depending on the plan and provider.
- Coverage length – The duration of coverage is another thing to take into account. You’ll want to know how long of a hospital stay will be covered. This can be anything from 1 day, three to ten days, 15 days, 30 consecutive days. Or even 2 hospitalizations per year.
- Age restrictions – Generally, people between the ages of 18 and 65 can purchase hospital indemnity insurance. And premiums rise as you age, the older you are the more expensive they can get. These age restrictions can change depending on the insurance provider you select.
The Bottom Line
When it comes to insurance there isn’t a solution that works for everyone. But if you find that you have gaps in your coverage, hospital indemnity insurance and other supplemental plans can help you fill those gaps.
You’ll need to think about if you want the greatest protection possible from unforeseen catastrophes. This is especially true if you have a high-deductible health insurance policy. Which means that your health benefits won’t start until you’ve paid a sizable deductible.
But if you think you have enough emergency funds to cover any gaps in your health insurance. Supplemental insurance might not be right for you at this time. This is especially true if your health savings account (HSA) has a substantial balance. The most important thing is to consider all of your options and pick the best one for you.