Understanding Hospital Indemnity Insurance

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If you’ve ever spent any time in a hospital (of course, any time spent at a hospital is really too long) you’ve probably felt a bittersweet feeling stemming from having your health problem (hopefully) taken care of, but also the bitter taste of the hospital bill you know you’re going to receive, which can be more bitter than any pill you have to take while at the hospital. If you don’t carry health insurance, you definitely know the big blows are still coming — and you thought appendicitis could be painful. Today, the average length of a hospital stay is five days, and costs more than $30K dollars. 

Unfortunately, even those with health insurance are faced with high medical bills due to health insurance policies not covering certain health issues, opting for high deductibles you haven’t even begun to meet, and numerous other factors, like covering treatments for pre-existing conditions. Not all health plans are created equal, and a lot of people simply don’t take the time to review their coverage until it’s too late. Instead, they think they got a great deal for a low price. Like all other lines of insurance, this is exactly when people end up in trouble — they discover coverage limitations too late, but had opted for price instead of quality.

Health insurance isn’t a magical card the doctor’s offices swipe, absolving you of owing money for health care. Such “magical thinking” usually turns into one feeling as though they were a fool and had been duped by what some feel are one of the best magicians of all — insurers. Rising medical costs is currently a trend. Maybe you know you bought the Cadillac of health insurance, or maybe you know your health insurance coverage is insufficient. Perhaps you don’t know anything about your health insurance other than the fact that you carry an insurance card in your wallet. Either way, there’s something to help soften the blow of astronomical medical bills. While your health insurance can pay for hospitalization, other costs are associated with hospital stays too. And you thought appendicitis and medical bills were painful.

So what’s the answer? It’s still not magic, but when it comes to health insurance coverage gaps or limitations, the solution can be more breathtaking than any David Blaine magic trick.

Hospital Indemnity Insurance & What It Covers

The answer for at least a bit of looming medical expenses can be hospital indemnity insurance.

It may sound like legal or insurance mumbo-jumbo, or seem like one of “those” policies insurers sell policyholders that people think aren’t really needed. However, it’s actually pretty straightforward. Different coverage options are available. One may cover short-term stays and limit benefits to a maximum number of days while other plans provide more long-term coverage. Either way, it provides a cash benefit paid directly to you, and can be used to help pay for out-of-pocket expenses health insurance doesn’t cover.

A hospital insurance plan can cover certain medical expenses. Even if your health insurance covers a large portion of your hospital stay, you may still be required to meet a deductible or pay a co-pay. Depending on your health insurance plan, your deductible could be $1,500 or higher. (The exact reason high-deductible health plans aren’t always the best option.) If you found your health insurance from the bottom of the barrel, you’ll likely be left with even higher bills even after your insurance pays their portion. In any of those scenarios, if that money isn’t readily available, it could put you in a financial bind — fast.

It can even help you with “room and board.” If you require a private room and nurse, hospital insurance can help pay for that as well. That takes care of your “rent” at the hospital, but what about the rent or mortgage for your house? Such expenses are on-going and expected, but hospital stays often have unexpected living expenses. Those can include extra living expenses too, like extra housing accommodations sometimes required due to hospital stays. Usually hospital stays cost you extra by way of extra transportation costs, more money spent on meals outside the home, and more. That quickly adds up, topped off with the fact that you’re unable to work. That’s possibly covered too — some plans cover loss of income.

You can also purchase hospital indemnity plans for specific situations. This is a valuable tool for young families trying to have a baby. If family members are in good health, high deductible health plans may cover regular expenses, and hospital insurance can pick up the rest. Typical out-of-pocket expenses can range from $500 to $3K, and by using a hospital insurance plan, that saved money can go towards the baby instead of to hospital bills. Some jobs may not pay maternity leave. If you’re planning on starting a family, start looking at plans even before you’re pregnant. If for no other reason, look at it as an investment into protecting your children’s well-being. If you have young children, this kind of policy can also help pay for education and childcare while you’re sick.

Other options even have the luxury of benefits for outpatient procedures — just because you aren’t staying in a hospital doesn’t mean that recovery isn’t necessary. As the medical field seeks to become more efficient and as technology grows, more people may find themselves able to forgo long hospital stays or in-patient surgeries. However, that will never fully stop the high costs of medical treatment and certainly won’t excuse you from paying other bills.

Thinking medical bills will just “go away” after a certain time and not paying them really is magical thinking. Not only will they not go away, but if you don’t pay them, you won’t be allowed to forget it either and those you owe will find a way for you to pay — with or without your cooperation. For that reason, one of the most important benefits of hospital insurance is protection of your assets. In the U.S., the number one reason for bankruptcy is health care, with nearly 50% of all cases claiming inability to pay medical bills. The scary part was that the majority of these people had health insurance. Even with full coverage, the price of hospital stays are staggering, especially in long-term disease situations.  More than 1 million new cases of cancer pop up each year, eating into not only people’s health, but into their savings and assets too.

How does hospital indemnity insurance work and cost?

Hospital indemnity insurance is not health insurance. You can own just this kind of policy, but it’s not a wise decision. This policy won’t cover normal doctor visits, any prescription drugs, and various other health care costs depending on the policy. It is 100% there to supplement health insurance.

However, that fortunately means there are some special allowances not seen on most health insurance policies. There aren’t any restrictions on providers, and you can’t be denied coverage. When you’re hospitalized, you’ll need to inform your insurance company immediately. You’ll have to submit a claim, and once approved, you’ll begin receiving daily benefits. Different plans have different benefit structures, so you’ll need to learn about this type of insurance so you can find one that works best for your needs.

The cost of a plan depends on the age of the person seeking coverage. Other factors include the amount of coverage you plan on purchasing as well as the insurance company. Benefits can be purchased for individuals or families, and may be subject to a deductible. Plans can range from $50 per month to more than $400, so it’s imperative to shop around. When you insure more people or possess more risk, your plan will cost more, but basic individual plans can be relatively inexpensive.

Do I need hospital indemnity insurance, and how much do I need?

If you already have regular health insurance, you may not feel like paying more premiums. Hospital insurance could easily save you money though, no matter who you are. There isn’t a certain demographic that needs to purchase this type of policy, but consider your personal circumstances. The prime candidate? Anyone who questions how their bills will be paid if they were in the hospital. However, if you can afford to pay extra medical or living expenses while hospitalized, you may not need hospital insurance. On the other hand, you could reserve your savings and invest in hospital insurance.

When determining how much coverage to buy, consider income and living expenses. The right policy will provide coverage up to your income, as long as you don’t spend over what you make. Using this manner, most necessities should be covered, but as is the wise rule of any insurance policy, purchase more than what you need, especially if you want to be covered for a certain period of time.

As usual, you’ll need to weigh cost versus benefit. There are some who think hospital indemnity insurance is a waste of money, and others believe it can pose great value. There are also those who have been able to keep the wheels turning thanks to this coverage. Odds are that if you have hospital insurance, you can rest your head on that flimsy hospital pillow much easier.

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