Indemnity Health Insurance Vs. Fixed Benefit Plan: Which is better?

Posted on: Mar 27, 2023 | 3 mins | Written by: HDFC ERGO Team

Indemnity Health Insurance Vs. Fixed Benefit Plan: Which is better?

The cost of quality healthcare services is skyrocketing, and hospitalisation expenses can quickly drain a person’s lifelong savings. To combat this, many insurance providers offer a range of health insurance products to help mitigate the financial burden during medical emergencies. Indemnity health insurance policies, for instance, are healthcare plans that pay the actual medical expense arising from hospitalisation up to the sum insured mentioned in the policy. When buying the best health insurance, check the coverage of the indemnity health insurance, exclusions, and other terms and conditions of the policy. The best health insurance should provide you with maximum financial protection when you need it.

What is Hospital Indemnity Health Insurance?

Hospital indemnity insurance is a type of health insurance plan where the insurer will reimburse the actual medical expenses incurred due to hospitalisation or other medical treatments up to the sum insured. The sum insured is the maximum amount that you will receive as compensation in the event of a claim. Most medical insurance plans, such as individual health insurance and family health insurance, are indemnity plans.

For example, let's say the sum insured of your indemnity plan is Rs 7 lakh, and you undergo surgery, the cost of which is Rs 5 lakh. The insurer will reimburse the actual expenses, but it will not be covered if your policy has deductibles or co-pay. If you have a 10% co-pay in your medical insurance plan, the insurer will pay 90% of the claim amount, and you will pay the remaining amount. Similarly, if you have a deductible of Rs 20,000, the insurer will pay Rs 4.8 lakh, and you have to pay the rest.

Benefits of Hospital Indemnity Insurance

Let’s take a look at some of the benefits of hospital indemnity insurance:

1. Wide coverage:

The indemnity plan covers a wide range of diseases, treatments and medical procedures. Based on the type of hospital indemnity insurance you choose, the plan will cover pre- and post-hospitalisation expenses, inpatient hospitalisation, diagnostic tests, ICU charges, daycare procedures, OPD expenses, domiciliary charges, medicines, doctors’ consultation fees, room rent, etc.

2. Cashless hospitals:

You can avail of cashless hospitalisation in any of the network hospitals of the insurance provider. You do not have to worry about arranging funds for the treatment or paying the bills upfront. There’s also no need to submit bills and receipts while raising the claims. The insurance company will directly get the bills settled with the hospital.

3. Flexibility to choose hospitals:

In hospital indemnity plans, insurers have tie-ups with various hospitals, giving you the option and flexibility to choose the best hospital based on your preferences.

4. Multiple claims:

Unlike benefit-based plans, when you opt for hospital indemnity insurance, you can make multiple claims under the same policy up to the sum insured.

5. Affordable premium:

The premium of most indemnity-based health insurance plans is cost-effective because they may have deductibles or co-pay clauses in which the policyholder pays a certain portion or percentage of the claim amount. The higher the deductible/co-payment, the lower the premium.

Indemnity Insurance Plans vs. Defined Benefit Plans: Which One is Better?

So, how is anindemnity plan different from a defined benefit plan? Let’s find out:

Parameters	Indemnity Plan	Fixed Benefit Plan
Meaning	The insurer will reimburse you for the actual medical expenses incurred on hospitalisation or other medical treatments up to the sum insured	The insurer will provide a fixed lumpsum amount to the policyholder irrespective of the expenses incurred
Coverage	Extensive coverage as an indemnity plan covers various illnesses, treatments and procedures	Limited to specific critical illnesses
Compensation	The insurer will pay only your medical expenses	The payout can be used for medical and non-medical expenses, such as household expenses, children’s education, etc.
No. of claims	Multiple claims can be made under the same policy during the policy tenure up to the sum insured	Only a single claim; the entire sum insured is provided by the insurer when you raise a claim
Out-of-pocket expenses	The policy may have deductibles/co-pay, which means you have to pay some portion of the claim amount from your pocket	No deductibles/co-pay clauses
Premium	Cost-effective	The premium is usually higher

Which plan is better depends on your medical needs and family medical history. You should opt for indemnity insurance if you want extensive coverage against maximum ailments, treatments, and procedures at an affordable premium. But opting for a fixed benefit plan makes sense if you have a family history of critical illness. A fixed benefit plan will provide added financial protection if you already have a regular medical insurance plan. Both plans have their objectives, so you should choose the one that fits your requirements and budget.

Conclusion

While purchasing the best health insurance plan, do thorough research and buy the one that provides maximum protection. Now that you know what is hospital indemnity insurance, its benefits, and how hospital indemnity differs from fixed/defined benefit plans, analyse your needs and buy the best health insuranceto protect yourself and your loved ones financially.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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