What Is Hospital Indemnity Insurance?

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Hospital indemnity insurance can provide you with a cash benefit if you receive medical care that requires you to spend the night in a hospital and potentially if you receive major outpatient medical services. Once you receive a payout from your insurer, you are free to spend the money at your discretion.

Read below for information that can help you decide whether you need a hospital indemnity insurance plan such as when your coverage would take effect and what factors can impact the price of coverage.

Key Takeaways

  • Hospital indemnity insurance pays out a cash benefit if you need to stay in a hospital or ICU overnight and may cover some outpatient services such as surgery.
  • The cash benefit from a hospital indemnity insurance policy goes to you rather than your health care provider, which means you are free to spend it as you please.
  • Your plan may pay you a lump sum when you are first hospitalized followed by additional payments for every subsequent day you are in the hospital or ICU.
  • Hospital indemnity coverage is not an appropriate substitute for major medical insurance and should only be purchased as a supplemental plan.
  • The cost of hospital indemnity insurance depends on factors such as your age and the amount of coverage your policy provides.

How Does Hospital Indemnity Insurance Work?

Hospital indemnity insurance is a type of supplemental health insurance that pays you a cash benefit whenever you are hospitalized due to a sickness or injury or receive other covered health care services. This cash benefit can help you make up for lost income while you are in the hospital or otherwise alleviate the financial strain associated with receiving medical care.

Since your hospital indemnity insurance settlement goes directly to you rather than your medical provider, you are allowed to spend it however you wish.

For example, you could use it to take care of the copay or coinsurance that comprises your share of the hospital bill, pay for medical-adjacent expenses like transportation to physical therapy sessions or cover everyday living expenses like rent and groceries.

Many hospital indemnity insurance plans extend coverage to your spouse and dependents. Keep in mind that, although your medical provider will generally file claims with your primary health insurance carrier on your behalf, you will most likely have to file a hospital indemnity insurance claim yourself.[1]

What Does Hospital Indemnity Insurance Cover?

Hospital indemnity insurance usually kicks in if you need to stay in a hospital bed overnight or receive critical care in an intensive care unit (ICU). Your insurance provider may give you an upfront first-day confinement payment anytime you are hospitalized plus additional payments for every day you remain in the hospital.[1]

For example, if your plan comes with a $1,000 first-day payment and $200 per day for every subsequent day, then your insurance company should pay you $2,200 after you spend one week in the hospital. Some policies also come with separate payments for hospital confinement and ICU confinement, which means your daily benefit is effectively doubled while you stay in the ICU.[1]

If you are willing to pay a higher premium, your policy may also take effect if you undergo surgery, visit the emergency room (ER) or are taken to the hospital in an ambulance even if you leave the hospital on the same day.[2]

What Isn’t Covered?

You won’t receive a hospital indemnity insurance payout after undergoing minor or preventive treatments such as going to a doctor for a routine checkup. Even when you do receive covered services, there will likely be a limit on the amount of money you can receive per day and the number of days you can receive money. For example, Protective Life’s hospital indemnity plans for American Dental Association (ADA) members can provide up to $1,000 per day for up to 180 days.[3]

Keep in mind that the cash benefit you receive from your hospital indemnity insurance company generally won’t be enough to put a dent in a typical hospital bill, which averages around $30,000 for a three-day stay.[4] As a result, you should only purchase hospital indemnity coverage to supplement your major medical insurance rather than replace it.

How Much Does Hospital Indemnity Insurance Cost?

The cost of insurance for hospital indemnity largely depends on factors like how old you are and how much coverage your policy provides. For example, a 20-year-old ADA member would pay $1.96 per month for a Protective Life policy that provides a $100 daily benefit. Meanwhile, a 65-year-old ADA member interested in a $1,000 daily benefit and an extended care rider would have to pay $101.69 per month.[3]

Who Should Get Hospital Indemnity Insurance?

You may want to consider purchasing hospital indemnity insurance if you have a preexisting condition that increases your odds of being hospitalized or if you plan on starting a family soon and want to receive extra coverage for childbirth-related hospital stays. However, some plans may exclude coverage for preexisting conditions and pregnancy, so it’s important to evaluate a policy thoroughly to see if it meets your coverage needs before you buy it.[1]

Hospital indemnity insurance could also be useful if you frequently travel and want extra coverage to account for the higher out-of-pocket costs you will face if you need to receive extensive care from a medical provider outside of your main health plan’s network.

You should note that insurance providers may restrict hospital indemnity coverage to people of a certain age. For example, Cigna’s individual hospital indemnity insurance plans are only available to people ages 50 to 85.[5]

How To Get Hospital Indemnity Insurance

Hospital indemnity insurance may be available through your employer or you may be able to find coverage for yourself separately. If you’re shopping for individual coverage, it’s recommended that you parse through quotes from three to five health insurance companies before settling on a policy.

To make this process as efficient as possible, you can take advantage of an online marketplace like SmartFinancial. Type your zip code below to begin a questionnaire about your coverage needs and budget. From there, we can connect you with agents who can provide you with health insurance quotes from insurers that sell hospital indemnity coverage.

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What does hospital indemnity mean?

“Indemnity” refers to a contractual obligation to compensate someone following some kind of loss, meaning “hospital indemnity” refers to an agreement wherein your insurer will compensate you with a direct cash benefit anytime you have to stay in a hospital.

Is hospital indemnity insurance worth it?

Hospital indemnity insurance may be worthwhile if you regularly travel across the country and risk needing to receive out-of-network medical care, have a preexisting condition that your policy will cover or plan on starting a family and want coverage for pregnancy-related hospital stays.

What are the differences between critical illness and hospital indemnity insurance?

Critical illness insurance provides a lump-sum payment if you are diagnosed with a severe disease like cancer or kidney failure, while hospital indemnity insurance provides an upfront payment plus recurring payments for as long as you have to stay the night in a hospital. However, the two coverage types are similar in that they provide you with a cash benefit that you can spend freely.


  1. Allstate Benefits. “Hospital Indemnity Insurance Frequently Asked Questions (FAQs),” Pages 1-2. Accessed Nov. 17, 2023.
  2. Anthem. “Hospital Indemnity Insurance - What Is It.” Accessed Nov. 17, 2023.
  3. Protective Life. “ADA Hospital Indemnity 2023 Premiums,” Page 1. Accessed Nov. 17, 2023.
  4. HealthCare.gov. “Health Coverage Protects You From High Medical Costs.” Accessed Nov. 17, 2023.
  5. Cigna Healthcare. “Hospital Indemnity Insurance for Individuals.” Accessed Nov. 17, 2023.

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