Understanding how medical insurance works can be difficult. So, it's easy to start tuning out when you hear about supplemental insurance plans—like hospital indemnity—until you realize how it may be able to help you prepare financially, if you end up in the hospital. A report by Salary Finance, reveals that 32 percent of working Americans have outstanding medical debt, and 54 percent of people with medical debt have defaulted on it.
Below, we explain what you need to know about hospital indemnity insurance, and why it might be worth investing in, if you think you or an immediate family member may end up in the hospital.
What is hospital indemnity insurance?
Hospital indemnity insurance is a supplemental insurance plan that pays a lump sum directly to the insured person, not to medical providers, for covered conditions and occurrences. Therefore, you can use the funds on anything you want. Once the money is in your hands, you call the shots.
Can you really use hospital indemnity insurance on anything?
Yes! One of the biggest advantages of hospital indemnity insurance is its flexibility. Unlike medical insurance, which may only cover very specific costs, hospital indemnity insurance pays a lump sum benefit that can be used however the insured person sees fit. That can be to cover costs from an extended hospital stay, transportation to and from follow-up appointments, and more. Here are a few expenses you might want to use it for:
- Deductibles and co-payments
- Out-of-network care and treatment
- Medical testing
- Therapy and rehabilitation
- Lodging costs, if you need to travel for care
- Any household bills
How can hospital indemnity insurance help my family save money in the long run?
The average hospital stay clocks in at around $30,000, according to healthcare.gov. Meanwhile, 20 percent of American households have less than $1,000 in savings. That's a huge gap.
Also, consider the possibility that being in the hospital (and recovering afterward) may bring on additional expenses, like childcare, food deliveries, and more that can put a burden on your budget.
For those reasons, having a lump sum payment from a hospital indemnity insurance plan can help keep your family's finances on track. Plus, paying a monthly premium that's deducted from your paycheck can make financial planning easier and be more affordable than you think.
If you’re preparing to select benefits during open enrollment, take our quiz to see if hospital indemnity insurance—as well as other products—might be right for you.