Picture yourself in five years. Are you imagining future you on a yacht or in a hospital bed?
It doesn’t hurt to plan for both. Hernias, broken bones, ruptured appendices — they can all strike without warning, creating plenty of hassles in their wake.
After all, hospitalizations can leave a lasting financial scar: The average hospital stay (which lasts about five days) can cost more than $10,000. Standard health insurance helps, but it might leave some expensive gaps in your coverage. Luckily, a hospital indemnity plan can take you the rest of the way.
What Is Hospital Indemnity Insurance?
Hospital indemnity (or “fixed indemnity”) plans are supplemental insurance policies that pay fixed cash benefits for hospitalizations. With simple, straightforward payouts — for example, $100 for each day spent in inpatient care — these plans go well with traditional health insurance because they cover areas that a regular health plan might not.
It makes sense when you consider that even with health insurance, you’re still probably going to have to pay the copays and deductible — plus applicable coinsurance amounts — of a hospital stay. And that’s just the medical costs. While you’re recovering, rent, utility bills and other household expenses will still be adding up. The money you get from a hospital indemnity plan can go toward those expenses, too.
Best of all, these plans are likely cheaper than your monthly coffee budget. But before you buy a hospital indemnity policy, ask your broker these six questions to be certain you’re getting the right plan for your needs.
1. What Will the Plan Cover?
Coverage varies from plan to plan, so ask what the plan will — and won’t — cover for planned or unplanned hospitalizations. For example, most plans won’t cover costs as a result of self-inflicted injuries or unlawful acts, but hospital stays for things like gastric bypass surgery, pregnancy, vasectomy reversal or health issues that take place when you’re traveling internationally may be gray territory. If the medical event is already covered by a workers’ compensation plan, it might not be eligible for coverage either.
2. What Are the Rules Surrounding Preexisting Conditions?
Some hospital indemnity policies place restrictions on preexisting conditions. Others might institute a waiting period before filing a claim as a result of a condition you had before you bought the policy. Ask your broker to be sure.
3. What If I Have to Stay in the Hospital for a Long Time — or More Than Once?
Some hospital indemnity plans may give you an initial admission payout as soon as you’re hospitalized on top of a daily hospitalization (or “confinement”) payout. But read the fine print carefully here: Those benefits may be subject to occurrence or duration limitations.
For example, you may be eligible for $1,000 per hospital admission, but only once a year. You might also get a $100 payout for each day you’re hospitalized, but just for up to 30 days. After those limits are exhausted, you might not qualify for other hospital-related payouts.
4. Am I Covered If I Need Rehabilitation Therapy?
Check the plan’s individual rules surrounding inpatient rehab therapy, including whether there’s a maximum length your rehab stays can last for each hospitalization or for the whole plan year. You might get $100 a day for inpatient rehab with a certain plan, but only 15 days per accident and 30 days total per calendar year.
5. Does the Type of Facility or Department Matter?
Some hospital indemnity plans limit intensive care unit (ICU) coverage from step-down units, also known as intermediate care units. These serve as a “go-between” place to transition stable patients from the ICU to the general hospital ward. Other types of facilities — such as convalescent, or extended care, homes — might not count either. Double-check before enrolling in any new plan.
6. When Can I File a Claim, and How Quickly Will I Get the Check?
When you’re in the hospital — and potentially out of work — you’ll want a plan that pays out your benefits fully, and fast. Ask how long a typical claim takes to process and whether there are any potential barriers to filing claims. Will you be able to get benefits starting from the first day you’re covered, or will you need to go through a waiting period?
Hospitalizations are rarely fun under the best of circumstances, and the financial stress that they bring with them is enough to make anyone tear their hair out. Having a strategy in place before you’re rushed to the emergency room will help protect your bank account — and all for cheaper than you might think.
What is hospital indemnity insurance, and is it right for you? Check out a hospital indemnity policy in action with Joy and Evan’s story.