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What is Indemnity Health Insurance Plan, Its Meaning & Benefits?

Any unexpected medical emergency shouldn’t be a time to worry about hospitalisation expenses when it comes to your family's health. The best way to reduce these medical costs is to get a health insurance policy.

An Indemnity health insurance plan can help you in such situations! Under this plan, the insurance company will reimburse you for medical expenses incurred for hospitalisation or other treatments up to the sum insured.

Unlike traditional plans, indemnity insurance puts you in charge, offering flexibility, broad coverage, and financial security when needed. Let’s discuss what an indemnity policy in health insurance means and its benefits.

What is Indemnity Health Insurance?
How Does Indemnity Policy Work?
Why Should You Choose Indemnity Plan?
What’s Covered and Not Covered?
Benefits of Indemnity Health Insurance Plans
Advantages and Disadvantages
What are Fixed Benefit Health Insurance Plans?
Indemnity vs Fixed Benefit Plans
Frequently Asked Questions

What is Indemnity Health Insurance?

Policies that reimburse you for the actual medical costs incurred during hospitalisation are known as an indemnity health insurance policy. In this plan, you can claim up to the maximum amount specified in your policy.
You can either opt for a cashless claim or a reimbursement claim under the indemnity health insurance plan. If you choose to make cashless claims while admitted to a network hospital, the hospital will receive a set amount directly from the insurance company.
In case of a reimbursement claim, you first have to pay the expenses incurred out of your pocket, and later, the insurance company will reimburse you the amount.

How Does an Indemnity Policy in Health Insurance Work?

As mentioned above, under these kinds of plans, you will get a cashless reimbursement for the cost of hospitalisation or medical treatment up to the sum insured.

So, let’s look at an example. Say you have an indemnity-based health insurance policy with a sum insured in health insurance of ₹5 lakhs, and you undergo treatment in a hospital that costs ₹2 lakh. In this case, your insurer will compensate you for these expenses. You just have to submit the relevant bills and medical documents. The remaining ₹3 lakh can be used for further medical expenses during the policy term.

However, note that this reimbursement will not cover any deductibles or co-payments included in the policy. For example, if you have a 15% copay, your insurer will pay 85% of the claim amount, while you bear the rest. On the other hand, if you have a deductible of ₹20,000, your insurance company will reimburse ₹1.8 lakh, while you pay out the rest.

Why Should You Choose an Indemnity Health Insurance Plan?

Indemnity health insurance offers freedom from financial burden and extensive coverage during need. Whether it’s a routine check-up or a specialised treatment, you have control over your healthcare decisions, ensuring you get the best care without unnecessary restrictions under such plans.

Here is why you should choose an indemnity health insurance plan:

What’s Covered and Not Covered Under Indemnity Health Insurance Plan?

Indemnity health insurance offers flexibility and control over healthcare decisions, but it is essential to understand what is covered and what is not. Here’s a general representation of inclusions and exclusions under such a plan:

What’s Covered Under Indemnity Health Insurance	What’s Not Covered Under Indemnity Health Insurance
In-Patient Hospitalisation Expenses	Cosmetic & elective procedures
Daycare Treatment Expenses	Expenses arising from alcohol & drug abuse
Pre & Post Hospitalisation Expenses	Expenses for personal comfort in the hospital
Health Check-ups	Treatments resulting from criminal acts
Home (Domiciliary Hospitalisation)	Expenses related to sterility and infertility
Ayush Hospitalisation

Note: These inclusions & exclusions are generic and not Digit specific. It can differ from policy to policy based on certain terms and conditions. Read your policy document to know what is included and excluded in your particular policy.

What are the Benefits of Indemnity Health Insurance Plans?

Indemnity health insurance plans offer a range of benefits that provide financial security, flexibility, and peace of mind regarding medical expenses.

Here are the benefits of indemnity health plans:

Advantages and Drawbacks of Indemnity Health Insurance

Indemnity health insurance provides policyholders with comprehensive coverage; however, there are some disadvantages to this type of policy. Below is a comparison of the advantages and drawbacks of indemnity health insurance:

Advantages of Indemnity Health Insurance	Drawbacks of Indemnity Health Insurance
You can visit any hospital, doctor, or specialist without restrictions on your network.	Some pre-existing conditions or specific treatments may not be covered immediately.
Covers hospitalisation, surgeries, diagnostics, and specialist treatments.	Some plans require you to pay a portion of the medical bill before insurance kicks in.
You can make multiple claims up to the sum insured in a policy year.	While premiums are often affordable, they can increase based on factors such as age, health status, or claim history.

What are Fixed Benefit Health Insurance Plans?

A fixed benefit health insurance plan is a type of health insurance where a fixed amount of the sum insured is paid at the time of a claim.

Common examples include critical illness plans and personal accident policies, which provide a lump sum payment. For example, if your sum insured is ₹5 lakhs, upon diagnosis of pre-determined critical illnesses, or after an accident, you will receive the entire ₹5 lakh, which you can then use to cover treatment expenses.

The benefits are that there are no sub-limits or co-payments, and the lump sum payment can be used for pre or post-hospitalisation expenses. However, it only covers some specific ailments or illnesses.

Difference Between Indemnity & Fixed Benefit Plans

When selecting health insurance, understanding the distinction between indemnity and fixed-benefit plans is essential. Each plan serves different needs, and selecting the right one depends on your healthcare priorities and financial preferences. Let’s see how they differ from each other:

Parameters	Indemnity Plan	Fixed Benefit Plan
What is it?	The insurer will reimburse you for medical expenses incurred for hospitalisation or other treatments, (up to the SI).	Upon diagnosis of a critical illness or certain medical conditions, the insurer will make a lump sum payment (of the entire SI).
What is covered?	It offers coverage for several diseases, medical conditions, and treatments	These plans are limited to specific critical illnesses and conditions.
What can it be used for?	The compensation will only cover your hospital bills, and some expenses, such as post-hospitalisation expenses, will not be covered.	The compensation amount can be used for any purpose, including post-hospitalisation, medication, household expenses, and children’s education.
What is needed for a claim?	When you make a claim, you will need to submit all relevant hospital bills, medical documents, etc.	Fewer documents are required, usually just a diagnosis report from a registered medical professional.
How many times can you claim?	You can make multiple claims during the year until the entire sum insured is used.	When you make one claim, it usually uses the entire sum insured amount.
Do you have to pay anything?	The claim amount may be subject to deductibles, co-payment clauses, or sub-limits, meaning you may have to pay some portion of the expenses on your own.	There are no deductibles or sub-limits included in the claim amount.
How much is the premium?	The premium is more cost-effective.	The premium is usually higher.
Are there any other benefits?	Insurers can tie up with network hospitals and offer cashless claims.	The benefit amount can be used to cover any expenses that are not covered by a regular health insurance plan.

So, when you are buying a health insurance plan, ensure that you get the one that provides optimum protection. In most cases, an indemnity-based plan will offer the most coverage as it provides more coverage, including hospitalisation, at a lower premium. However, if you already have some type of health coverage, a fixed-benefit plan will offer additional financial protection.

Thus, consider your situation, healthcare needs, and medical history before you decide which one is best for you and your family.

FAQs about Indemnity Health Insurance

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What are the disadvantages of indemnity health insurance?

There are a few drawbacks to indemnity health insurance. For example, it has higher premiums, and due to co-payments or deductibles, you may also have more out-of-pocket expenses.

How do you know if an indemnity health plan is right for you?

If you have no previous health insurance or you are looking for a plan that covers a wide range of illnesses and treatments, indemnity health insurance might be right for you. It offers extensive coverage for all your needs and can be claimed multiple times until your sum insured is exhausted.

Is indemnity health insurance better than fixed benefit insurance?

This depends on your current situation and your healthcare needs, as the two types of policies are unique. If you need a health insurance with wider coverage (for example as your primary cover), it is advisable to opt for an indemnity-based plan. However, if you are looking to supplement your regular health cover and gain additional coverage for critical illnesses, it might be right to opt for a fixed benefit health insurance plan.

Should I get indemnity health insurance or fixed benefit insurance if I have employee health insurance?

Some employee health insurance plans might have insufficient coverage, especially when it comes to out-of-pocket expenses like deductibles, co-pays, etc. Additionally, they might not offer coverage for certain health conditions. Check the coverage you already have. If you need a second insurance to cover any gaps, opt for indemnity insurance. If all you need is additional coverage, you might wish to opt for fixed-benefit insurance.

Are preventive services covered under indemnity health insurance?

Yes, many indemnity plans cover preventive services like annual check-ups and vaccinations, but coverage can vary from insurer to insurer. It's important to review your policy details to understand what is included.

Do indemnity health insurance plans cover medicine costs?

Yes, but the indemnity health insurance that covers medicine costs differs from plan to plan. Some indemnity plans include prescription drug coverage, while others may require a separate plan or rider.

What are the advantages of indemnity health insurance?

The main advantages are flexibility and freedom to choose any healthcare provider. This can be particularly beneficial if you have a specific doctor or specialist you prefer.

Are there any disadvantages to indemnity health insurance?

Certain disadvantages of indemnity health insurance include higher out-of-pocket costs, the need to pay upfront and seek reimbursement, and paying for copayments or deductibles.

How do I file a claim with indemnity health insurance?

You typically need to submit a claim form along with your healthcare provider's bills and receipts. Your insurer will then process the claim and reimburse you for covered expenses.