What is hospital indemnity insurance?

If you’ve heard the phrase “hospital indemnity insurance” and thought to yourself, “What exactly does indemnity even mean?” Well, you’re not alone. But despite the jargon in the product name, hospital indemnity insurance can have a significant impact on the lives of people who own this valuable coverage.

We’ll help make hospital indemnity insurance (or hospital insurance) understandable by exploring:

• What is hospital indemnity insurance?
• Why is hospital indemnity insurance important?
• How and where can you get hospital indemnity insurance?

So, what exactly IS hospital indemnity insurance?

Generally, “indemnity insurance” is defined as a form of compensation for damages, losses, or exemption from liability for damages.¹ Ever seen or heard stories of people who leave the hospital with significant bills despite having medical insurance? That’s where hospital indemnity insurance can help – to cover those expenses.
 
Simply put, hospital indemnity insurance is a form of supplemental health insurance that offers benefits to help offset the steep costs linked to a hospital stay. When a policyholder is hospitalized, a typical policy awards the policyholder with a predetermined sum for admission to the hospital and/or each day you spend in the hospital, regardless of the actual costs incurred. It can also pay additional benefits for things like transportation to the hospital, surgeries, or childbirth. It’s designed to bridge the gap in coverage left by traditional health insurance plans, offering policyholders a way to tackle expenses not covered by their primary insurance.
 
It’s important to understand that hospital indemnity insurance is not a replacement for primary health insurance — it might come with certain limitations and exclusions. This could include differences in the maximum benefit amount per day/per hospital stay or a pre-existing condition limitation — but these can vary depending on the specifics of your policy, so carefully reviewing your individual policy details is highly recommended.
 
Why is hospital indemnity insurance important?



Hospitalizations occur much more frequently than you might believe. The American Hospital Association says over 33 million people in the U.S. are admitted to a hospital every year — with the average cost of a three-day hospital stay being $30,000.² Hospital indemnity insurance can provide much-needed financial protection for these costs.
 
Hospital indemnity insurance pays benefits directly to the policyholder, giving them the freedom to use their cash benefit however they like. Benefits can be used to cover out-of-pocket expenses and high deductibles but can also be used for daily living expenses like transportation, childcare, utilities, and more.
 
However, hospital indemnity insurance isn’t only for unforeseen hospitalizations, it can be used for planned stays as well. For example, in the US, the average cost of giving birth is $18,865, with out-of-pocket costs ranging anywhere from $2,800-$3,200.³ Having hospital indemnity insurance could help offset those out-of-pocket costs.
 
Finally, many hospital indemnity policies include “wellness benefits”. These are benefit payments for routine tests and screenings. So, you don’t always have to be in the hospital to get a payment. In fact, you can get a benefit just for checking up on your health - which will hopefully help keep you out of the hospital. And with Trustmark’s Hospital StayPay^®, you can even use your hospital indemnity insurance to cover mental health wellness & addiction recovery to really help round out your medical coverage.⁴  
 
How and where can you get hospital indemnity insurance?

You can buy an individual hospital indemnity insurance plan from third-party vendors, but it’s commonly offered as a voluntary benefit through your employer during open enrollment periods, similar to life insurance, dental, vision, etc. Because hospital indemnity insurance is a voluntary benefit, it’s employee-paid and payments are often automatically deducted from your paycheck. Some policies are offered as guaranteed issue — without the need for a medical screening, exam, or questionnaire (however, it ultimately depends on the policy you opt into).
 
To learn about your employer’s voluntary benefit offerings, scheduling a meeting with your company's HR department is a good first step. During the discussion, ask about the availability of hospital indemnity insurance (or other voluntary benefits), enrollment periods, and the procedure for accessing them.

If you would like to learn more about covering the gap in medical insurance, be sure to check out our other health products blog, Understanding the medical gap.
 
1: What Is Indemnity Insurance? How It Works And Examples. Investopedia. 2023.
2: Why health insurance is important. HealthCare.gov. 2023.
3: How Much Does It Cost To Have A Baby? 2024 Average. Forbes Advisor. 2024.
4: For product information, please contact your local Trustmark Sales Representative.

_{Trustmark Hospital StayPay® is a registered trademark of Trustmark Insurance Company. Benefits, definitions, exclusions and limitations, and product availability may vary by state. Underwritten by Trustmark Insurance Company.}