How Does Hospital Indemnity Insurance Work?
Many Americans suffer from financial hardship after being hospitalized. Fortunately, hospital indemnity insurance can help you protect your finances, avoid medical debt, and cover basic living expenses after a major hospitalization.
Even if you have a health insurance plan, you may want to consider purchasing hospital indemnity insurance. Many patients with health insurance still have to pay out-of-pocket costs after being hospitalized, which can be a financial burden. For example, according to KFF, the average patient in 2020 with employer coverage had to pay $1,280 in out-of-pocket costs after being hospitalized for COVID-19.
Hospital indemnity insurance be used to cover those costs, as well as non-medical costs. It can be an essential lifeline for those who would otherwise face massive medical debt or the financial burden of lost wages.
Why Is Hospital Indemnity Insurance Beneficial?
Unfortunately, your chances of being admitted to the hospital may be higher than you think. According to the American Hospital Association, around 33 million people are admitted to the hospital every year.
Medical debt is one of the largest financial burdens Americans face. According to the Consumer Financial Protection Bureau, over 58% of debt is due to medical bills. In addition, you usually must take time off from work after being admitted to the hospital. You may also have to pay for childcare and other services while you recover. These costs can create financial difficulty, even if your health insurance provider covers the entire hospital stay.
One of the main reasons people face medical debt is that their health insurance policy has a high deductible. Of course, this doesn’t even touch on the costs of copays, coinsurance, medication, or other out-of-pocket expenses that health insurance doesn’t cover.
What Can You Use Hospital Indemnity Insurance For?
Hospital indemnity insurance is a supplemental insurance policy that is separate from your traditional health insurance plan. You will pay a premium, as with any other insurance type.
You will receive a cash benefit every day you are hospitalized. Instead of going to the healthcare provider for healthcare costs, this benefit is paid directly to you, tax-free. That way, you can use it however you see fit. For example, many policyholders use the money to cover the copay of their hospital stay; others use the funds to cover the cost of medication, childcare, groceries, rent, or transportation.
Here are some examples of how people can use hospital indemnity insurance:
- Krystal spent three days in the hospital. Her health insurance covered most of the stay because she had already used her deductible. However, Krystal needed to take two weeks of unpaid leave from work. She received $1,000 from her two-day hospital admission, which helped pay for childcare and groceries.
- Jacob had a health insurance policy with a steep deductible, so he had to pay $3,000 out of pocket for his hospital admission. He was in the hospital for a week and had a hospital admission policy payout of $3,500. Jacob could pay the remaining balance on his bill and cover the cost of his medication.
When Will You Receive a Payout From Your Policy?
Hospital indemnity insurance only provides coverage for unavoidable hospital visits. For example, you will usually receive a payment if you are admitted to a hospital or ICU overnight. Some policies also provide coverage for emergency room visits or outpatient surgeries.
A United Benefits Specialist can help you explore your hospital indemnity insurance options to find the right coverage for you and your family. Fill out the form below to get in touch.