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What Is Hospital Indemnity Insurance?

Hospital indemnity insurance is insurance that pays a fixed amount when you are hospitalized due to a covered injury or illness. On average, a three-day hospital stay costs around $30,000, so if you’re ever hospitalized, you’ll probably want all of the insurance coverage you can get.

Unlike standard health insurance, your payment amount from a hospital indemnity insurance policy does not vary based on the actual hospital charges, and you can spend the payout on whatever you want. People commonly use their hospital indemnity benefits to pay for deductibles and other out-of-pocket expenses not covered by traditional health insurance.

However, this type of insurance does have some restrictions, such as maximum daily benefit amounts and limits on how long you can receive daily benefits for. 

What Is Supplementary Medical Coverage?

Indemnity insurance policies provide security in cases of major financial loss or burden, such as hospitalization. Indemnity coverage is a type of supplementary insurance, which provides added coverage on top of a standard health insurance policy.

In addition to hospital indemnity insurance, common types of supplementary medical coverage include:

  • Critical illness insurancePays a lump sum to the insured when they are diagnosed with a covered condition
  • Dental insuranceCovers dental care expenses
  • Disability insurance (short-term and long-term): Pays a portion of the policyholder’s salary if they lose the ability to work due to a disability
  • Life insurance: Provides a payout to the policyholder’s beneficiaries when the policyholder passes away
  • Vision insurance: Covers vision care expenses

How Does Hospital Indemnity Coverage Work?

Hospital care is no small financial undertaking, and hospital indemnity coverage can relieve some of your financial burden if you are hospitalized. 


Eligibility for this type of insurance depends on where the insurance comes from. Those with employer-sponsored medical coverage, for example, may also enroll in hospital indemnity insurance through their employer as long as they meet certain employment criteria. Only a few insurers provide hospital indemnity coverage for individuals to purchase.

Some insurers may set age restrictions, such as 50 to 85. Some may reduce benefits once you reach a particular age, such as 70.

Generally, it’s not difficult to qualify for hospital indemnity coverage. You should especially consider purchasing a policy if you have a chronic condition or you anticipate being hospitalized in the near future.

How Much Is the Benefit?

Daily benefit amounts usually start at around $100 and can go up to $1,000 or even more. Time limits vary among policies as well. Some might pay your daily benefit for up to 90 days per year, while others might pay for up to 180 days.

Evaluate your health situation to determine how much coverage you’ll need. For example, if you have a chronic condition for which you’re frequently hospitalized, you might want a policy with a higher benefit amount and a more generous time limit.

What Does It Cover?

Once you’ve received your payout, you can spend it at your discretion. However, limitations apply to the situations that would warrant a payout.

Hospital indemnity policies commonly provide payouts in the following scenarios:

  • Ambulatory services
  • Critical care unit stays
  • Emergency room visits
  • Hospital stays with surgery
  • Hospital stays without surgery
  • Intensive care unit stays
  • Outpatient surgeries

Not all hospital indemnity policies cover all of the above situations. But you can expect yours to pay a benefit if you are hospitalized for an injury, an illness, or to get surgery.

What Does It Not Cover?

Though some policies extend to ambulance rides, emergency room visits, and outpatient care, not all do. Additionally, some policies do not cover routine hospitalization for childbirth within 10 months following the policy’s start date.

Coverage generally does not apply if you are hospitalized for any of the following reasons:

  • Cosmetic surgery
  • Injury sustained during extreme sport
  • Injury sustained during illegal activity
  • Injury sustained during professional, organized sport
  • Military service or training
  • Self-inflicted injury
  • Use of alcohol or drugs, except for some inpatient rehabilitation treatment
  • Acts of war

Check the details of your policy to see when you might receive a payout.

Hospital Indemnities vs. Health Insurance

Hospital Indemnities
Health Insurance
Funds paid to…
Insured person
Medical providers
Average deductible
$8,435 per year (employer-sponsored single coverage)
Available to individuals?
Yes, but it’s uncommon
Funds used for…
Policyholder’s discretion, no limits
Approved medical expenses
Coverage guaranteed?
Yes, typically
Coverage may be contingent upon medical screening
Continued coverage after changing jobs?
Yes, typically

Hospital indemnity insurance is meant to supplement, not replace, traditional health insurance. 

This coverage provides maximum flexibility by paying you directly and not regulating how you spend the payout. While a standard health policy might pay your health providers to cover most of your medical services, a hospital indemnity payout can go toward uncovered medical expenses, copays, rent, bills, groceries, or whatever you need the funds for.

A handful of insurers sell hospital indemnity insurance to individuals, but most people purchase this type of coverage through an employer-sponsored group plan. Even if you have hospital indemnity coverage through an employer, you may be able to take the plan with you if you change jobs.

How Much Does It Cost?

This type of insurance is relatively affordable, with many insurance providers offering single-coverage plans starting at around $10 per month or even less for younger beneficiaries. You do not have to pay a deductible to receive coverage.

However, if you want more coverage or to add dependents to your plan, you can expect to pay a higher premium. Plus, different insurance companies charge different prices, and your premium price may vary further based on individual factors like your location and age.

If you want a standard hospital indemnity plan that pays out around $100 per day for covered hospitalizations, you can expect to pay between $10 and $20 per month for coverage.

Who Should Get Hospital Indemnity Insurance?

Anyone could benefit from financial assistance during hospitalization, but you should seriously consider purchasing hospital indemnity coverage if you:

  • Have heart disease, diabetes, or another chronic condition that could result in hospitalization
  • Expect to undergo a covered surgery or medical procedure that would require hospitalization
  • Get your primary medical insurance from a high-deductible health plan, which usually incurs higher out-of-pocket costs
  • Anticipate needing medical care from an out-of-network provider, which tends to cost more
  • Plan to become pregnant

Even if none of the above situations apply to you, hospital indemnity coverage can provide added security and peace of mind.


  • Payouts go directly to you, the insured person.
  • Payouts are guaranteed if you are hospitalized for a covered reason.
  • Monthly premiums are relatively inexpensive.
  • You do not have to meet a deductible to receive coverage.
  • You can decide how to spend your payout without limitations.
  • You may be able to take your plan with you if you change jobs.
  • This coverage provides an extra layer of financial security in case you are hospitalized.
  • Hospital indemnity coverage can give you peace of mind if you are older or have a chronic condition that is likely to require hospitalization.
  • A hospital indemnity plan can cover your dependents.


  • A premium is an added monthly expense.
  • Some plans do not provide payouts for ambulance services, outpatient care, childbirth, or emergency room visits.
  • Hospital indemnity insurance does not cover hospitalization for cosmetic surgery.
  • Insurers may reduce hospital indemnity benefits for older beneficiaries.
  • It may be difficult to purchase an individual hospital indemnity plan if you do not have employer-sponsored medical insurance.
  • You may pay a higher premium depending on your age, location, and insurance provider.
  • Your policy’s time limit on its benefits may not suffice for long-term hospitalizations.

How To Get Hospital Indemnity Insurance

Follow the below steps to obtain coverage:

  1. See if your current medical insurance provider also offers this type of insurance.
  2. If so, review your provider’s plan offerings to select the best plan for you.
  3. Enroll in your chosen plan during your next enrollment window.
  4. When you need benefits from your insurance, submit the proper documentation to your insurer.

If you do not have employer-sponsored health insurance or your insurer does not offer hospital indemnity plans, you can purchase an individual policy. However, only a handful of insurers sell individual hospital indemnity policies.

Putting It All Together

Hospital indemnity insurance pays out a cash benefit if you are hospitalized for a covered reason, such as injury or illness. Most of these policies provide a daily benefit for the duration of the hospitalization up until a certain time limit, such as 90 or 180 days. Daily benefits typically range from $100 to $1,000, depending on your chosen plan.

Coverage terms vary amongst plans. For example, some plans will pay a benefit for outpatient care, whereas some will not. Some will only pay a benefit for unexpected hospitalizations, and most will not pay for hospitalizations for cosmetic surgeries or injuries sustained during extreme sports or illegal activity.

Frequently Asked Questions

If you pay taxes on your plan’s premium, you should not have to pay taxes on any benefits you receive. However, if your premium is not subject to tax, you may have to pay tax on the benefits.

No, you should not have to complete a waiting period before becoming eligible for benefits. However, some policies may not cover routine hospitalization for pregnancy within 10 months following the plan’s start date.

Yes, some insurance providers sell hospital indemnity plans on an individual basis, which you can purchase if you are not employed. However, this type of coverage is most commonly available through employer-sponsored health plans.

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