The need for health insurance in today’s times is undisputable. Medical emergencies could strike anybody. And with inflation spiraling upwards, a single ailment may cause significant financial losses. As important as it is to have a health plan in place, it is equally important to have the right kind of plan. Today, the options are plenty in the insurance market. We could broadly categorize these available health insurance plans into two kinds- Indemnity health plans and fixed benefit plans.
An indemnity health plan is the most basic and commonly opted form of health insurance. It is a health plan that covers expenses towards hospitalization treatment and diagnosis of a medical condition, up to the sum insured of the policy.
Outline of an Indemnity Plan
An indemnity plan reimburses expenses on actual bills. This reimbursement is up to the pre-determined sum assured, not more and not less, as per the terms and conditions of the plan. The claims that it settles are either in the nature of reimbursements or cashless benefits. Bills are to be submitted post discharge, and once they are approved, benefits are paid out as per the actual expense incurred. If it is a cashless benefit, the insurer would settle the bills directly with the hospital at time of treatment, without having you to arrange for immediate cash.
Key Features of an Indemnity Plan
- Comprehensive coverage: Indemnity plans cover a host of medical conditions. From hospitalization, surgery costs, nursing, specialist and anesthetist fees, diagnosis, chemotherapy, radiotherapy, dialysis and so on, indemnity benefits are wide.
- Type of cover: Indemnity benefits are available either as an individual policy, which would cover a single person or, as a family floater that would cater to all members of the family.
- Sum assured and benefit: The benefit you would be entitled to what your bill value actually is. This claim amount should be within the pre-determined sum assured limit of your policy.
- Indemnity based plans pay the actual expenses only after hospitalisation, on submission of original papers, valid bills and discharge reports.
Indemnity Plan and Fixed Benefit Plan- What’s the Difference
As mentioned earlier, health insurance plans are either indemnity or fixed benefit plans. Though both the options have the same objective, of covering unexpected medical conditions, they differ greatly in various aspects. Here is a closer look.
- The coverage: Fixed benefit plans are very limited in their cover. The plan would generally cover specific kinds of ailments, such as a critical illness plan. On the other hand, indemnity plans are designed to provide a wholesome and comprehensive cover. Their scope of cover is far wider encompassing hospitalization costs, doctors’ fees, consultation, and treatment of any ailment as per the terms and conditions of the policy.
- Benefit pay out: Indemnity Plans pay for all expenses as per the actual hospital bill, up to the sum insured of the plan. So when you are covered by an indemnity plan, you would get a benefit amount on what you have spent for your treatment. On the other hand, a fixed benefit plan pays you a lump sum amount as policy benefit, irrespective of what your actual expenses are. The pre-determined cover amount is decided at initiation and you are guaranteed to receive it in case of a claim.
- Tenure of plan: Indemnity health plans come with duration of one year, and would have to be subsequently renewed. Fixed benefit plans are generally for a period of 3 years.
- Time of claim benefit: Your indemnity plan would pay the benefit only after you have submitted your discharge report and valid bills. On satisfactory evaluation of the same, the payout would be made to you. Fixed benefit plans are a guaranteed amount and documents are minimal. Just a proof of diagnosis of the ailment is generally required, and the guaranteed sum is paid out.
- The cost factor: Considering the comprehensive coverage they offer, premiums are higher than fixed benefit plans.
- Policy continuity: In a fixed benefit plan, the policy would lapse once the claim is made. On the other hand an indemnity plan allows for concurrent claims.
Why is an Indemnity Plan required?
With a benefit plan offering a guaranteed lump sum benefit, why should one opt for an Indemnity Health Plan? What is the advantage?
- Comprehensive cover: One of the main reasons one should go in for an indemnity plan is because they have a wide and comprehensive cover. Fixed benefit plans cover single or limited ailments and condition. Indemnity plans have a better scope. From chronic ailments to accidental injuries, the uncertainties could all be covered.
- For prolonged ailments: Certain ailments may require prolonged treatment and long term care. Indemnity plans serve as an advantage by footing the bills up to the sum assured, thereby reducing the financial burden.
- For a strong health insurance base: Of course it may seem far more effective to revise a lump sum instead of reimbursement. But for long term medical care and a strong health protection what would work best is an indemnity health plan.
If you are looking for wholesome health cover, indemnity polices should be made as a primary insurance. As per personal requirement and need, fixed benefit products could always be used as top ups.
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