What are Indemnity Plans?

Like other plans, an Indemnity plan will reimburse the cost of medical expenses to the policyholder. This plan will refund the actual amount incurred as an expense during the medication, and the reimbursed amount should be within an assured medical cover.
Indemnity health plans are also known as:

  1. Traditional indemnity plan
  2. Fee- for service plan

For example, the cost of cover is Rs 5 lakhs, and a hospital billing amount is Rs 2 lakhs. The company has to pay Rs 2 lakhs to the policyholder. The balance amount is left with the company until the maturity of the policy.
And this agreement with the company will be predetermined. The best example is the “Mediclaim Insurance Plan”- a popular health product.
Generally, this plan has a predetermined deductible. The part of medical expenses will be paid to the policyholder, and the insurance company will pay the remaining amount, and this is “co-pay.” Some health insurance plans will not have any deductibles, where the insurance company will incur the entire cost.

Advantages of Indemnity plans:

  • The indemnity policy is very different from the other policies offered by Health Maintenance Organizations (HMO) and Preferred Provider Organization (PPO) because it allows you to choose any medical center and obtain medical services according to your wish.
  • This plan will eliminate the need for referrals.


  • A Health Maintenance Organization (HMO) is a network or organization that provides health insurance coverage for a monthly or annual fee, made up of a group of medical insurance providers that limit coverage to medical aid provided from doctors that are under the contract of the HMO.
  • Preferred Provider Organization (PPO) is similarly a medical care arrangement in which medical professionals and facilities provide services to subscribed clients at reduced rates. PPO medical and healthcare providers are called preferred providers.

Four essential points of indemnity plans:

If you have an opportunity to choose this plan, these are the keynotes to remember:

  1. Indemnity plans are customer-oriented and are available at a reasonable rate. It is your call to select your medical service provider, and thus, this plan eliminates unexpected costs. Indemnity plans are self-managed health insurance plan.
  2. Indemnity plans have a co-pay clause that can help you to manage the maximum cost that you could pay as a part of the policy.
  3. No geographical barriers. Unlike your HMOs and PPOs, indemnity plans provide you with the freedom to choose your doctor or specialist with a few limitations. There is no network specifying the service providers.
  4. Indemnity plans do not cover preventative services(measures taken for disease prevention). The cost of these services may not count towards your deductible.

How do you know what is covered by the Indemnity Health Insurance Plan?

Readout the indemnity policy booklet carefully. Know what is covered and what is not covered. Have an eye on benefits under this plan. And also ask an insurance agent to explain the unclear things.

Therefore, indemnity plans are suitable:

  • If you’re willing to have the freedom of choosing doctors and hospitals.
  • If you want to visit any physician, you choose freely.
  • If referrals to get to the specialist is not required.

Stay Cautious; Stay Wise

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