Home / Money / Personal Finance /  What are indemnity based health insurance policies?

A health insurance plan is one of the strongest shields that one can have against unplanned medical expenses. The most commonly bought health insurance plans are indemnity-based health insurance plans and are also commonly known as mediclaim policy.

Indemnity-based health insurance policies generally pay for the actual hospitalization expenses incurred during the treatment up to the policy sum insured limit. It means that the insurer will pay you the treatment cost within the sum insured limit as offered under the policy. The indemnity health policy can be a regular or comprehensive health insurance policy for individuals, family and senior citizens.

Extensive coverage

As the name suggests, these plans function on the principle of indemnity i.e. in case of medical expenses incurred by a policyholder, the insurance company will reimburse these expenses, subject to a maximum sum insured limit. Ankit Agrawal, CEO and co-founder, InsuranceDekho said, “These plans provide coverage for pre-hospitalisation expenses, in-patient treatment including doctor’s fees, ICU, room charges, diagnostic tests, surgery, medicines, as well as post-hospitalisation expenses and daycare treatment. These plans also cover the treatment cost for covid-19 treatment. However, these plans come with a clause that requires hospitalisation of at least 24 hours to be eligible for a claim."

Besides, there might be some deductions for the cost of consumables such as PPE kit, if billed separately, at the time of claim. However, the remaining amount would be payable. “For new indemnity health plans, covid treatment would be covered after an initial waiting period of 30 days. If you have an existing policy, covid hospitalisation would be covered at any time," said Dhirendra Mahyavanshi, co-Founder, Turtlemint, an insurtech firm.

Mahyavanshi further said, “In case of home hospitalisation, due to non-availability of hospital beds or if you are in no condition to be moved to the hospital, the cost of treatments would be covered under ‘domiciliary treatments’ which is covered under most health plans."

Cashless treatment

The insurance companies usually have tie-ups with several hospitals and medical facilities. This offers two types of benefits to the policyholders of indemnity-based health insurance plans. Firstly, they enjoy the flexibility to choose from several hospitals and medical facilities which provide quality treatment. Secondly, at these partner hospitals, one is eligible for availing a cashless treatment i.e. the medical bill is directly settled by the insurance provider with the hospital and the policyholder need not pay anything (except co-payment share) from his pocket. A list of nearest hospitals with cashless facilities can be checked before buying health insurance.

Co-payment and sub-limits

In health insurance, co-payment refers to the portion of the medical bill that is agreed to be paid by the policyholder and not the insurance provider. It can be given as a fixed amount or a fixed percentage of the treatment expense. “Most of the indemnity-based health insurance plans come with a co-payment option. Plans with higher co-pay components usually have lower premium payout requirements," said Agrawal.

For instance, Mr A has a health insurance plan which provides him with a health cover of 5 lakh, featuring a co-payment of 50,000. Mr A had a medical emergency because of which he had to get hospitalised. His medical treatment bill came out as 5 lakh. Then out of this 5 lakh, 50,000 would have to be paid by Mr A and the remaining 4.5 lakh would be paid by his insurance provider.

These health plans may also come with a sub-limit on the room rent and other associated expenses. If you choose a room whose rent exceeds the sub-limit, there would be a proportionate deductible on your inpatient hospitalisation claim. Mahyavanshi said, “You must avoid buying indemnity health plans with sub-limits on room rent and other treatment costs, even if it costs a little more as these sub-limits confines the scope of overall coverage."

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