The pros and cons of indemnity plans

If you have health insurance and are looking for extra coverage, this type of plan could be one choice. Here’s what to know.

Let’s say you have a traditional health insurance plan. But maybe you need more coverage for out-of-pocket costs. Or you have a high deductible to meet.

You might also have cancer or heart disease in your family history. And you want to be prepared in case of a major health issue down the road.

Whatever the case may be, indemnity plans can come in handy. They’re a type of supplemental insurance that you pay extra for on top of your traditional health plan. They’re not meant to replace it but add coverage to it. (There is a monthly premium for supplemental insurance that is not included in what you’d pay for your primary health insurance.)

Before you buy indemnity plans, you need to know what they have and what they don’t have. But first, let’s take a closer look at what indemnity plans are and what types may be available to you.

Looking to explore indemnity plans? Call a licensed insurance agent at (800) 827-9990 to talk about available plans, or browse your options online today.

What are indemnity plans?

It’s worth repeating: Indemnity plans aren’t a replacement for your traditional health insurance. Instead, they provide benefits">additional benefits that supplement your primary health coverage.

These plans pay a fixed or preset amount for specific medical services. It doesn’t matter how much the service costs or how much your traditional health plan covers.

Some insurers may subject you to medical underwriting. That means they may review your medical records. If you have a pre-existing condition, like cancer or heart disease, you could be denied coverage.

What types of indemnity plans might be available to you?

You may have the following indemnity plans available to you:

1. Critical illness insurance. Typically, these plans provide a lump-sum benefit to you or your provider if you’re diagnosed with a covered serious illness. That could include cancer, heart attack or stroke. (Different plans may include different covered illnesses.) Besides what your traditional health insurance plan covers, you can use the critical illness benefit to cover things like out-of-pocket medical expenses or other related costs. You can also use the benefit to pay for personal expenses like daycare or rent/mortgage payment while you’re recovering. These plans aren’t meant to replace your traditional health plan.

   It’s important to know that you must buy one of these plans before you get a qualified serious illness. You may also be subject to medical underwriting. That means an insurer can deny you coverage if you have a pre-existing condition.

2. Fixed indemnity health insurance plans (aka hospital and doctor insurance plans). Fixed indemnity health insurance plans (hospital and doctor plans), pay a fixed or preset benefit for hospital stays, doctor’s visits, prescription drugs and more. That’s on top of what your traditional health plan already covers. These plans can help cover out-of-pocket costs, such as deductibles, copays and coinsurance. They’re not meant to replace your traditional health plan but to supplement it.
3. Hospital indemnity insurance plans (aka hospital insurance or hospitalization insurance). Hospital indemnity insurance plans provide a fixed or preset benefit for a specific number of days you’re in the hospital. That’s on top of what your traditional health plan covers. This can help cover expenses related to hospital stays, such as room and board, medical supplies and other non-covered costs. They’re not meant to replace your traditional health plan either. They’re meant to add extra coverage.

Check all the advantages of indemnity insurance for yourself. Call a licensed insurance agent at (800) 827-9990 to talk about available plans, or browse your options online today.

What are the pros of indemnity insurance plans?

Before you choose one of these plans, it’s a good idea to look at their pros. Here are 8 things to consider:

1. They may provide easy access to benefits. Depending on the plan, you could get access to benefits without needing to meet a deductible. For example, if you choose a hospital indemnity plan, you’d need to receive care for a qualified medical service and submit a claim form to receive the benefit.
2. They may have flexible enrollment periods. Typically, you can sign up for indemnity plans any time you want — you don’t have to wait for an enrollment period. For example, you can sign up for a fixed indemnity health plan at any time during the year. All you’ll need to do is pay your monthly premium (insurance bill) to continue receiving the supplemental coverage.
3. They may not require insurance networks. You won’t have to worry about needing to see providers in certain networks. Because the benefits are predetermined, that means you’d get the same benefits no matter where you get care. For example, if you have a fixed indemnity health plan and saw a doctor in any network, you’ll still receive the same benefit amount. Depending on your insurance provider, you may save by seeing a provider in that insurer’s network.
4. You may use the benefits however you wish. You can use the plan’s benefits the way you want. Let’s say you have a critical illness insurance plan and were then diagnosed with a qualified illness, such as cancer or stroke. You could use the lump-sum benefit to help pay for deductibles and other out-of-pocket medical bills. Or you could use the benefit to cover personal expenses while you’re being treated or recovering, like:
   – Childcare
   – Education for children
   – Groceries
   – Rent/mortgage payments
5. They may pair well with other types of insurance. You’ll find that certain indemnity plans work well with other types of insurance plans. Here are some examples:

   – Depending on which state you live in, term life insurance could pair well with a critical illness rider. If you were to be diagnosed with a qualified critical illness, you’d receive a lump-sum benefit based on the terms of your policy. (It’s important to understand that the benefit money would then be subtracted from your term life policy’s benefit.)

   – Hospital indemnity insurance pairs well with High Deductible Health Plans (HDHPs). That’s a type of health insurance plan that has a higher deductible than the average plan. The preset benefit could help pay for your deductible.

   – Fixed benefit health insurance pairs well with vision insurance. You could use the fixed benefit to help pay for out-of-pocket medical expenses like LASIK surgery, which is typically not covered by vision insurance, or copays for routine exams. (LASIK stands for laser-assisted in-situ keratomileusis.)

What are the cons of indemnity plans?

Indemnity plans may not be right for everybody. Here are 4 disadvantages you might run into when shopping for indemnity plans:

1. They may come with waiting periods. For some plans, you may have to wait for some time before your benefits kick in. For example, if you have a critical illness insurance plan, there’s a 30-day waiting period on benefits in most states. You’d typically get paid after first diagnosis for a qualified critical illness, like cancer or a heart attack. But you’d have to be diagnosed 30 days after the plan start date, or your insurer could deny you coverage.

   Depending on the state you live in, some fixed benefit health plans have a 6-month waiting period before you can get your preset benefit for preventive wellness visits. Others may have a 30-day waiting period. It’s always a good idea to check with your insurer or review the plan’s brochure to see if waiting periods apply.

2. They may exclude pre-existing conditions. You may be subject to medical underwriting to receive coverage from some indemnity plans. That means your insurer can review your health history and deny you coverage if you have a pre-existing condition like cancer or diabetes. It’s always a good idea to read the insurance brochure or talk to a licensed insurance agent before purchasing a plan.
3. They may have a maximum cap on coverage. That’s the most an insurance company will pay out for covered medical services in a plan year or your lifetime. Depending on the plan, you may be subject to maximum caps on coverage for different medical services. That can limit the total amount of benefits you receive. That would be true for all indemnity plans, because you only get a set amount of money.
4. They don’t replace a traditional health plan. While you can buy a stand-alone indemnity plan, it won’t replace the coverage of traditional health insurance. For example, indemnity plans aren’t subject to the Affordable Care Act (ACA), meaning they may not cover essential health benefits and could deny you coverage if you have a pre-existing condition.

Where can you buy indemnity plans?

Many private insurers offer indemnity plans. To learn whether yours does, you can call a licensed insurance agent at (800) 827-9990, or browse your options online today.

For informational purposes only. This information is compiled by HealthMarkets Insurance Agency and does not diagnose problems or recommend specific treatment. Services and medical technologies referenced herein may not be covered under your plan. Please consult directly with your primary care physician if you need medical advice.