Hospital Indemnity Insurance Explained

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Hospital indemnity insurance provides cash payments for hospital-related expenses. It’s typically used to cover daily living expenses, to make up for lost income or to pay for out-of-pocket medical expenses, such as your deductible, copay or coinsurance.

Hospital indemnity policies pay out a set amount of money depending on the medical service performed. With this payment model, called a fee-for-service model, you don’t have to worry about in-network versus out-of-network coverage since you receive the same payout regardless of your medical provider.

What do hospital indemnity policies pay for?

Hospital indemnity policies typically cover hospital stays, intensive care and critical care. However, some policies may pay for other services like outpatient care and emergency room visits. Unlike the most common kinds of policies, PPOs and HMOs, hospital indemnity policies don’t differentiate between in-network and out-of-network care providers.

Hospital indemnity policies typically pay you directly. You receive a set payment after you receive a certain type of care. For example, your policy might pay $200 for every day you spend in the hospital. That money is yours to spend as you please.

Accident insurance vs. hospital indemnity insurance

The biggest difference between accident and hospital indemnity insurance is that accident coverage pays out after specific accidents, while indemnity coverage pays out after certain types of hospital stays. Both are kinds of supplemental health coverage meant to assist with costs your primary medical insurance won’t cover.

Many people use hospital indemnity insurance to pay for their primary policy’s deductible and other out-of-pocket expenses. However, it can also replace lost income or pay for incidental costs, such as child care, transportation and temporary lodging.

Accident insurance pays out after a qualifying injury, such as a broken limb, paralysis, burns or whiplash. By contrast, hospital indemnity is typically triggered by certain types of care in a hospital, usually called inpatient hospital care. They both provide cash payments that can be applied to your deductible, copay, coinsurance or everyday life expenses like food, rent and transportation.

Supplemental health policies aren’t subject to the same rules as major medical insurance. For example, both accident and hospital insurance can deny you coverage or charge you higher rates based on a preexisting condition. On the positive side, supplemental coverage tends to be much cheaper than regular health insurance.

Are hospital indemnity plans worth it?

Hospital indemnity plans are often worthwhile if your primary health insurance policy has a high out-of-pocket maximum. You should also consider supplemental coverage if you suffer from a chronic illness or if you’d struggle to meet a large, unexpected bill.


In America, the average cost for a hospital stay is $2,873 a day. The federal government has capped out-of-pocket maximums at $9,450 for 2024. If you have a $2,000 deductible and 20% coinsurance, you would hit that $9,450 figure in around two weeks. A hospital indemnity plan that pays out $300 a day would pay out $4,200, bringing your total out-of-pocket expenses down to $5,250.

Before you purchase a hospital indemnity plan, consider if an alternative solution like a gap health policy or a health savings account (HSA) would make better sense for you.

How to find the best hospital indemnity insurance

To find the best hospital indemnity insurance plan, you should look at factors like total payout, length of coverage and covered services. Because details vary so much from plan to plan, price is only one variable to consider.

  • Covered services: One policy might pay out for an ambulance ride and an emergency room stay, while another won’t.
  • Time limits: One policy may only pay out for 90 days in the hospital for a calendar year, while another covers 180 days.
  • Age restrictions: Some policies reduce benefits after you turn a certain age, such as 65 or 70.
  • Deductibles: Some hospital indemnity plans require that you pay a deductible before receiving benefits, while other policies operate with no deductible.
  • Payouts: You receive a daily cash benefit during your hospital stay. Payouts commonly range from $100 per day to $1,000 or more.

Who sells hospital indemnity insurance

You can buy hospital indemnity insurance through many large companies like Aflac, Aetna and Cigna. It’s also available to AARP members through a partnership with UnitedHealthcare.

  • AARP

  • Aetna
  • Aflac
  • Allstate
  • Anthem
  • Cigna
  • MetLife
  • Mutual of Omaha

Check to see if your employer offers indemnity coverage through a group plan since those plans tend to be the most cost-effective. If your job doesn’t provide hospital indemnity insurance, you can purchase an individual policy directly through an insurance company.

Frequently asked questions

What is hospital indemnity insurance?

Hospital indemnity insurance helps you cover the cost of hospital stays. You can use it in addition to your standard health insurance policy to limit your out-of-pocket expenses, such as your deductible, copay, coinsurance, lost income and living expenses.

What does a hospital indemnity plan cover?

Hospital indemnity plans generally cover hospital stays (including

Is indemnity hospital insurance the same as medical insurance?

No, indemnity hospital insurance is a supplemental form of health coverage that doesn’t provide enough coverage to work as a stand-alone policy. You cannot replace your regular health insurance with a hospital indemnity policy without exposing yourself to considerable risk.


ValuePenguin analyzed data collected by the Kaiser Family Foundation through the American Hospital Association to find the average cost of a hospital stay on a per-day basis. We also consulted for information regarding out-of-pocket maximum limits for 2024.

Editorial note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.