Phrases Made Easy: “Indemnity Insurance Policy”

Welcome back to another addition of “Phrases Made Easy” at our blog. Our goal with this blog series is to take all of those confusing and complicated insurance words, and make them easier for you to understand. At Policy Advantage Insurance Services, we feel that informed consumers can make a really big difference in our industry.

Today’s phrase is “Indemnity Insurance Policy.” The words “Insurance Policy” are easy to understand, but it’s the word “Indemnity” that has a tendency to hang people up. You’ll see it in many different insurance products; that’s one of the reasons we’ve selected this phrase. And we’ve got good news for you: this phrase is really simple.

So here we go. Here’s “Indemnity Insurance Policy” made easy:

An Indemnity Insurance Policy is an insurance policy that pays cash either directly to you (the policyholder), or to the provider (ie: someone like a doctor, dentist, or hospital). That’s all it is. It’s a cash payment from an insurance company.

There are various types of  insurance products that function as “Indemnity Insurance Policies.” We won’t list them all, but here are a few of the more common ones:

• Dental Insurance: some dental plans will have a value assigned to each procedure. For example, a crown may pay $250. This would be the amount paid to either you, or the dentist.
• Supplemental Health Insurance: many supplemental health insurance plans are written as “Indemnity Insurance Policies.” For example, a supplemental cancer plan may pay the policyholder $300 per day that they’re confined to a hospital in a cancer situation.
• “Mini-Med” or Hospital Indemnity Insurance: these are insurance plans that are not comprehensive major medical plans (ie: an HMO or PPO). They are plans designed to reimburse the policyholder (or hospital) in the event of a hospitalization. For example, a “Hospital Indemnity Policy” may pay the policyholder $1000 per day that they are confined to a hospital. This money can help offset some of the expenses associated with a hospital stay.

Here are a few additional important notes about “Indemnity Insurance Policies”:

• In most cases, the cash benefit needs to be assigned to either the policyholder or the service provider (ie: the dentist, doctor, hospital, etc).
• The cash benefit may pay for all, or only a portion of the bills. For example, some dental indemnity plans may pay the entire bill from the dentist. However, in many cases, a hospital indemnity plan will not cover the entire cost of a hospital stay.
• When it comes to indemnity insurance policies, there are typically no networks. This can be especially nice in dental situations, because the policyholder can select any dentist of their choice.

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