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Disclaimer:Tata Capital Limited (“TCL”) registered with IRDAI (License No. CA0896, valid till 21-Jan-2027), acts as a Corporate Agent “Composite” for Go Digit General Insurance Limited. Please note that, TCL does not underwrite the risk or act as an insurer. For more details on the risk factors, terms and conditions please read sales brochure carefully of the Insurance Company before concluding the sale. Participation to buy insurance is purely voluntary.

The Registered office of TCL is Tata Capital Limited, 11th Floor, Tower A, Peninsula Business Park, Ganpatrao Kadam, Marg, Lower Parel, Mumbai-400013.
The Registered Office of Go Digit: Go Digit General Insurance Limited, 1st Floor, Fairmont, Hiranandani Business Park, Powai, Mumbai – 400076.

Difference Between Fixed Benefit and Indemnity Plans Explained

In today’s world, health and wellness aren’t just trends; they’re a way of life! 💯

More people are focusing on fitness and well-being, but staying prepared for unexpected medical expenses is just as important. After all, a healthy lifestyle is incomplete without a solid health insurance plan!

Many people hesitate to get insured due to confusion or misinformation. That’s why we’re here to clarify things! This guide will break down the difference between fixed benefit health insurance and indemnity medical insurance, helping you understand the meaning of both in a simple and practical way.

Team Digit

What is Fixed Benefit Health Insurance Plan?
What is an Indemnity-Based Health Insurance Plan?
Fixed Benefit vs Indemnity-Based Health Plans
Benefits of Fixed Benefit Health Plans
Benefits of Indemnity Health Plans
Which is Better?
Frequently Asked Questions

What is a Fixed Benefit Health Insurance Plan?

Fixed benefit plans pay out a set sum insured if an insured person files a claim for a particular medical condition. The plan extends a guaranteed and fixed amount to its insurer if he/she experiences an insured event as laid out by the policy terms.

Here, the insured event can be medical conditions or critical illnesses, such as cardiovascular diseases, kidney functioning issues, and cancer, among others.

Moreover, a fixed-benefit health insurance plan extends a lump sum amount to the insured as a claim, regardless of the actual or intended expenses that he/she incurred during hospitalisation.

A Simple Example to Understand Fixed Benefit Health Insurance Plan

Think of a fixed-benefit health insurance plan like a set-price meal at a restaurant. No matter how much food actually costs, you get a fixed amount for each item on the menu.

For example, imagine you have a critical illness health insurance plan that offers ₹50,000 for a hospital stay, regardless of the actual hospital bill.

Now, let’s look at two different cases to understand how this works:

Case 1: If your hospital bill comes to around ₹40,000:

Since your insurance policy offers a fixed benefit of ₹50,000 for hospitalisation, you still receive ₹50,000, even though your actual expenses were lower. This extra amount can be used for post-hospitalization costs, medicines, or any other personal needs.

Case 2: If your hospital bill comes to around ₹60,000:

Since your policy provides a fixed payout of ₹50,000 for hospitalisation, you must pay ₹10,000 out of your pocket.

What is an Indemnity-Based Health Insurance Plan?

As the name suggests, an indemnity medical insurance plan indemnifies its policyholder against hospitalisation expenses. This plan reimburses the actual expenses incurred by the insured during hospitalisation. However, the plan reimburses these expenses only up to the total sum insured under it. A good example of this plan is Mediclaim, which is a popular insurance product.

Moreover, if an insured opts for a cashless hospitalisation plan, he/she only pays a certain fixed amount, and the insurer takes care of the rest. However, if this individual does not have a cashless hospitalisation plan, he must submit all receipts and bills to the insurer. Based on these documents, the insurance provider will reimburse the insured person.

Simple Example to Understand Indemnity-Based Health Insurance Plan

Think of an indemnity health insurance plan as a safety net for unexpected medical expenses, similar to how a company reimburses an employee’s travel expenses. Suppose an employee travels for work; they first pay for flights, hotels, and food, then submit the bills, and the company reimburses them. Indemnity health insurance works the same way!

Suppose Mr. Mehta, a 45-year-old businessman, has an indemnity-based health insurance policy with a sum insured of ₹10 lakh. One day, he experiences severe abdominal pain and is diagnosed with appendicitis, requiring immediate surgery.

Scenario 1: If He Chooses a Cashless Network Hospital

Mr. Mehta gets admitted to a hospital that is part of his insurer’s cashless network.
The hospital directly coordinates with the insurance provider.
Mr. Mehta only pays a small deductible or co-payment (if applicable), while the insurance company settles the rest of the bill directly with the hospital.

Scenario 2: If He Chooses a Non-Network Hospital

Mr. Mehta is admitted to a hospital that isn’t in the insurer’s network.
He pays the total hospital bill upfront, which amounts to ₹3.2 lakh.
After discharge, he submits all hospital receipts, doctor’s prescriptions and medical reports to his insurer.
After verification, the insurer reimbursed ₹3.2 lakh, ensuring that Mr. Mehta didn’t bear any financial burden.

Difference Between Fixed Benefit and Indemnity-Based Health Plans

If you are still confused between the fixed benefit and indemnity plans, we have made it simple for you! 🙂 Here are some key differences between both the plans based on sum insured, claim amount, limitations and premium which will help you compare the policy better.

Let’s compare them through the following table:

Basis of Comparison	Fixed Benefit Health Plan	Indemnity-Based Health Plan
Utility	This plan pays out the sum insured for pre-determined medical conditions or critical illnesses.	This type of health plan reimburses an individual for the money spent on medical treatment up to the sum insured.
Basic Requirements	It requires a policyholder to be diagnosed with a pre-determined medical condition as per the policy terms. To claim the insured amount, one must provide a diagnosis report by a certified doctor.	It typically requires the insured to be hospitalised or undergo medical treatment (day-care procedure or diagnostic tests). To make a claim, a policyholder must provide all hospital bills detailing every expense to the insurer or insurance company. Moreover, he/she must duly fill out and sign a claim form.
Ideal For	Ideal for critical illnesses, covering high medical costs and income loss.	Covers a wide range of illnesses and medical treatments.
Limitation of the plan	Eligibility for a fixed benefit health plan is limited to specific illnesses or ailments. Additionally, premiums for these plans tend to be more expensive than indemnity-based health plans.	Indemnity-based health insurance plans do not pay for deductibles as per the terms of their policy. Also, this plan has particular items in the expenses list whose cost it shall not bear, like gauze, gloves, oxygen masks, etc. Therefore, a policyholder must pay for these items in the event of hospitalisation or buy an add-on for consumable cover to cover such expenses.
No. of Claims	Just one claim: when you file a claim, the insurer provides the full amount insured.	A single policy may be used for more than one claim during the policy's term up to the sum insured.
Out-of-Pocket Expenses	No sub-limits on specific medical conditions, full coverage as per policy.	Comes with deductibles or a co-payment clause as per the policy.
Premium	Generally higher as compared to indemnity policy.	Generally cost-effective, with rates depending on age, pre-existing conditions, and policy features.

What are the Benefits of Buying Fixed Benefit Health Plans?

Medical emergencies often lead to prolonged hospital stays and significant financial strain. This burden is even greater for individuals diagnosed with life-threatening diseases, which have been on the rise in recent years.

In India, the prevalence of critical illnesses has seen a sharp increase. A 2020 report by the Indian Council of Medical Research (ICMR) predicts that fatalities due to such conditions will rise in the coming years (1). Given this concerning trend, it is essential to take proactive measures to safeguard yourself and your loved ones.

This is where fixed benefit health insurance plans prove to be particularly useful. 🙂

Here are some key benefits of fixed benefit health plans

Guaranteed Lump Sum Payout: The insured receives a pre-defined sum insured amount upon diagnosis, helping cover medical and non-medical expenses.
Covers Non-Medical Expenses: The payout can be used for loss of income, post-hospitalisation care, travel for treatment, or any other financial needs.
Acts as an Additional Financial Cushion: This plan enhances existing health insurance, ensuring comprehensive financial security.
No Restrictions on Usage: The payout is not limited to hospital bills; it can be used as per the policyholder’s discretion.
Beneficial for High-Risk Individuals: Added financial security can benefit those with a family history of certain illnesses or a high-risk lifestyle.
No Impact of Rising Medical Costs: Since the payout is fixed, inflation or increased hospital charges do not affect the insured amount.

What are the Benefits of Indemnity Health Plans?

When it comes to managing medical expenses, indemnity-based health insurance plans offer a flexible and comprehensive approach to coverage. These plans reimburse actual hospitalisation costs, ensuring that policyholders can access quality healthcare without worrying about financial constraints.

One key advantage of indemnity health insurance is that insurers often have tie-ups with a vast network of hospitals and medical centres. This allows policyholders to choose from a wide range of healthcare providers for treatment without the burden of upfront expenses.

Here are some key benefits of indemnity health insurance plans

Covers Actual Hospitalisation Costs: Reimburses medical expenses based on actual treatment costs, ensuring full financial protection.
Flexible Hospitalisation Options: Policyholders can choose any network or non-network hospital, depending on the policy terms.
Comprehensive Medical Coverage: This covers a wide range of illnesses, surgeries, and treatments, including pre and post-hospitalisation expenses.
Cashless Treatment Facility: Many indemnity plans offer cashless treatment at network hospitals, reducing the hassle of out-of-pocket expenses.
Renewable for Lifetime: Many indemnity plans come with lifetime renewal options, ensuring long-term healthcare security.

Which is Better - Fixed Benefit or Indemnity Health Insurance?

Both of these health plans are extremely distinctive and serve varied medical needs. Moreover, as observed in the table above, each of these plans has its benefits and drawbacks.

Another aspect of evaluating these two plans can be their respective tax benefits. However, health insurance tax benefits for both these plans are the same. Therefore, regardless of your choice, you can avail yourself of tax deductions as per Section 80D of the Income Tax Act, 1961. Here, a premium up to Rs.50,000 for senior citizens and up to Rs.25,000 in case of non-senior citizens is eligible for a tax deduction.

So, which one should you opt for?

This decision should be based on your needs and requirements. With a fixed indemnity medical insurance plan, you can achieve financial preparedness and higher protection for yourself and your family.

Moreover, given that we live stressful lives today that make us vulnerable to critical illnesses, it would make sense to supplement your existing health policy with a fixed-benefit health plan.

Parting Thoughts

Taking care of your health and that of your family is a matter of the greatest importance. However, it is common knowledge that medical care is currently expensive. Therefore, insurance plans offer you a way to evade hefty medical bills that can derail your finances. And we hope this guide provided you enough insight on the same and eliminated your hesitance to buy a health plan.

FAQs about Fixed Benefit vs Indemnity Plans

All

What is not covered under a regular indemnity health plan?

Indemnity-based health policies cover one’s cost of hospitalisation. However, it does not cover a number of expenses, such as the cost of medicines and post-operative care.

What is a fixed benefit health plan?

A fixed benefit health plan extends a guaranteed and fixed amount to its insurers when they face an insured event as per terms and conditions of the policy. Here, the payable insured amount is pre-decided and does not consider the actual amount of expenses incurred by the insured.

Is it good to buy health insurance?

Health insurance offers financial relief in the present by covering medical costs in the future. Therefore, it helps to be financially prepared and well-protected against health emergencies.

Are insurance premiums tax-deductible?

Yes, insurance premiums up to Rs.25,000 for non-senior citizens and Rs.50,000 for senior citizens are eligible for tax deduction under Section 80D of the Income Tax Act, 1961.

How do fixed benefit plans differ from indemnity plans in terms of payouts?

Fixed benefit plans provide a lump sum payout for covered events, while indemnity plans reimburse the actual expenses incurred, subject to policy limits.

Which plan offers more flexibility in choosing healthcare providers, indemnity or fixed plan?

Indemnity plans typically offer more flexibility, allowing you to choose any doctor or hospital, whereas fixed-benefit plans may have a more limited network.

Are fixed benefit plans suitable for covering hospitalisation costs?

Fixed benefit plans can help cover hospitalisation costs, but they may not fully cover all expenses if the actual costs exceed the fixed payout.

Can I make multiple claims in a year with both types of plans, indemnity and fixed?

Yes, you can make multiple claims with both fixed benefit and indemnity plans. Indemnity plans allow claims up to the sum insured, while fixed benefit plans pay a fixed amount per event.

Which plan is better for critical illnesses, a fixed plan or an indemnity plan?

Fixed benefit plans are often better for critical illnesses as they provide a lump sum payout that can be used for various expenses, including non-medical costs.

How do premiums compare between fixed benefit and indemnity plans?

Premiums for fixed benefit plans are usually lower than those for indemnity plans, as the payouts are predetermined and not based on actual expenses.

Can I have both fixed benefit and indemnity plans simultaneously?

Yes, you can have both types of plans simultaneously to maximise coverage and benefits.

Which plan is more suitable for families, indemnity or fixed plan?

Indemnity plans are generally more suitable for families as they offer comprehensive coverage for a wide range of medical expenses.

What should I consider when choosing between fixed benefit and indemnity plans?

When choosing between fixed benefit and indemnity plans, consider factors like

Your healthcare needs
Your financial budget
The type of coverage required
The flexibility in choosing healthcare providers
Network Hospital

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Go Digit General Insurance Limited | Corporate Office Address: Atlantis, 95, 4th B Cross Road, Koramangala Industrial Layout, 5th Block, Bengaluru 560095 | Registered Office Address: 1 to 6 floors, Ananta One (AR One), Pride Hotel Lane, Narveer Tanaji Wadi, Shivaji Nagar, Pune-411005, Maharashtra | Trade logo of Go Digit General Insurance Ltd. displayed above belongs to Go Digit lnfoworks Services Private Limited and is provided and used by Go Digit General Insurance Ltd. under license.

Difference Between Fixed Benefit and Indemnity Plans Explained

Table of Contents

What is a Fixed Benefit Health Insurance Plan?

A Simple Example to Understand Fixed Benefit Health Insurance Plan

What is an Indemnity-Based Health Insurance Plan?

Simple Example to Understand Indemnity-Based Health Insurance Plan

Difference Between Fixed Benefit and Indemnity-Based Health Plans

What are the Benefits of Buying Fixed Benefit Health Plans?

Here are some key benefits of fixed benefit health plans

What are the Benefits of Indemnity Health Plans?

Here are some key benefits of indemnity health insurance plans

Which is Better - Fixed Benefit or Indemnity Health Insurance?

Parting Thoughts

FAQs about Fixed Benefit vs Indemnity Plans

What is not covered under a regular indemnity health plan?

What is a fixed benefit health plan?

Is it good to buy health insurance?

Are insurance premiums tax-deductible?

How do fixed benefit plans differ from indemnity plans in terms of payouts?

Which plan offers more flexibility in choosing healthcare providers, indemnity or fixed plan?

Are fixed benefit plans suitable for covering hospitalisation costs?

Can I make multiple claims in a year with both types of plans, indemnity and fixed?

Which plan is better for critical illnesses, a fixed plan or an indemnity plan?

How do premiums compare between fixed benefit and indemnity plans?

Can I have both fixed benefit and indemnity plans simultaneously?

Which plan is more suitable for families, indemnity or fixed plan?

What should I consider when choosing between fixed benefit and indemnity plans?

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