What is Fixed Indemnity Insurance?
Fixed indemnity plans pay you a set amount if certain medical situations happen, like getting a critical illness or breaking a bone.
You might have a plan that gives you $100 per day if you're in the hospital, for example, or a plan that pays you $10,000 if you're diagnosed with cancer. Fixed indemnity plans are a good option if you want extra coverage. But you should also have a regular health insurance plan.
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Fixed indemnity insurance
What is a fixed indemnity plan?
A fixed indemnity plan is a type of supplemental health insurance that pays you a fixed amount of money if you have a specific medical need.
Unlike regular health insurance, the plan pays you, not your doctor, and you can use the money for anything you like. For example, if you have a hospital indemnity plan, your plan will pay you if you have to stay in the hospital. You can use the money to pay for your share of your medical bills. Or you could use it for other needs, like childcare, groceries or household bills.
Some fixed indemnity plans will pay you a per-day amount, while others will pay you a lump sum. For example, hospital indemnity coverage usually pays you a specific amount for each day you're in the hospital. Plans that cover serious illnesses, like cancer, often pay you a lump sum when you're diagnosed or pay you fixed amounts for certain treatments.
How do fixed indemnity plans work?
Choose your coverage level and buy a plan. When you buy a fixed indemnity plan, you'll choose how much coverage you want. If you're buying a supplemental cancer policy, for example, you'll be able to choose how much money you want if you're diagnosed with cancer. More coverage will mean paying more each month.
File a claim. If you are hurt, have to stay in the hospital or get a critical illness, you can file a claim based on the coverage you have. For example, if your plan covers hospital stays and you have to stay in the hospital, you can file a claim. Or if your plan pays you when you're diagnosed with heart disease, you can file a claim if you get a diagnosis.
Use the money for whatever you need. Fixed indemnity plans pay you, not your doctors. The money will either come as a lump-sum payment or in daily installments, depending on your plan. You can use the money to pay for anything, including medical bills, prescriptions, household services, groceries and even hiring a caretaker.
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What do fixed indemnity plans cover?
A fixed indemnity plan usually covers one specific medical situation, like if you have to stay in the hospital or get cancer. Typically, the plans fall into four coverage categories.
Accident
These plans pay you when you have injuries. They might also pay your family if you die after an injury.
Critical illness
These plans pay you if you get a serious illness, like cancer. You might get a lump sum or payments for specific treatments.
Doctor
Doctor plans pay a set amount for some types of care, like checkups and urgent care visits.
Hospital
Hospital indemnity plans usually pay you a set amount for each day you spend in the hospital.
Some plans include a combination of coverage. For example, you might find a plan that covers both doctor visits and hospitalization.
Fixed indemnity health insurance pros and cons
Fixed indemnity plans can be helpful, but they have drawbacks, too. You should make sure you understand the pros and cons and fixed indemnity insurance before you buy a plan.
Pros of fixed indemnity plans:
Cons of fixed indemnity plans:
Fixed indemnity plans vs. regular health insurance
Fixed indemnity plans aren't the same as health insurance, but they can be a good compliment to your main health insurance plan.
For example, say you have a regular health insurance plan and an accident indemnity plan. The regular health insurance has a $1,000 deductible. That means you have to pay the first $1,000 of your medical bills each year before your plan starts to pay. Your accident plan specifies that it will pay $1,500 for a broken bone.
If you break your arm and go to the emergency room, your health insurance plan will only start covering treatment if you've already paid $1,000 in medical bills. Your accident plan will pay you the $1,500 no matter what.
You can use $1,000 from your accident plan to pay for your health insurance deductible. You can use the other $500 for anything. Maybe you need to buy a sling and some ice packs, and you could even hire someone to mow your lawn or clean your house.
Indemnity insurance vs. traditional health insurance
Fixed indemnity | Traditional health insurance | |
|---|---|---|
| Cost | Usually cheap | $584/mo for a Silver plan |
| Coverage | Limited to specific situations | Covers at least 10 situations |
| Claims | Pays you directly | Pays your doctor directly |
| When to buy | Any time | Between Nov. 1 and Jan. 15 |
Fixed indemnity plans should not be used as a replacement for health insurance.
They offer extra protection, but they don't have broad coverage like health insurance plans do. A cancer indemnity policy, for example, can help you pay for unexpected costs after a cancer diagnosis. But it likely won't be enough coverage to pay for your treatment without health insurance.
Who should buy an indemnity plan?
You should consider a fixed indemnity plan if you have a regular health insurance plan and want more coverage.
If you have a high-deductible health plan, for example, and you don't have the money in the bank to pay for your deductible, a doctor or hospital plan could be a good idea. That way, if something serious happens, your indemnity plan can help you pay your deductible.
Critical illness plans can be a good idea if you have a high risk of developing a serious illness. And accident plans can be good if you're particularly prone to injuries.
But remember that fixed indemnity plans are extra coverage. You can buy one if you want extra help paying bills after your health insurance has paid. But you shouldn't use a fixed indemnity plan as your primary health insurance.
Frequently asked questions
What is an indemnity plan?
An indemnity plan is a type of supplemental health insurance, which means it's designed to complement your main health insurance plan. Indemnity plans pay you a set amount if you meet certain requirements. A hospital indemnity plan might pay you $100 per day that you're in the hospital, for example.
Is fixed indemnity insurance worth it?
Fixed indemnity plans can be worth it if you want extra coverage. They can also be useful if you don't have the savings to pay for your portion of medical bills. But fixed indemnity insurance doesn't have the same level of coverage as a regular health insurance plan. If you want a fixed indemnity plan, use it as a supplement to your regular health insurance.
How do indemnity plans usually reimburse medical costs?
Fixed indemnity plans pay you directly instead of paying your doctors. Depending on the company you choose and how you have the plan set up, you might get a check in the mail or your money could be deposited into your bank account. For example, if you have a plan that pays you $10,000 if you're diagnosed with cancer, you might get a $10,000 check or a deposit into your bank.
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