What is the purpose of a hospital indemnity policy?

A hospital indemnity policy primarily serves to provide financial assistance by paying a predetermined cash benefit for each day, week, or month that a policyholder is confined to a hospital. This cash benefit is designed to assist with various out-of-pocket expenses that may arise during a hospital stay, such as co-pays, deductibles, or other living expenses, allowing the policyholder to focus on recovery rather than financial strain.

Unlike comprehensive health insurance, which typically covers a wide range of medical expenses and may include outpatient care, a hospital indemnity policy has a more focused purpose. It does not cover all medical expenses annually, as comprehensive plans do, nor is it limited strictly to preventive care. Furthermore, the policy is not designed specifically for outpatient services, but rather aims to support individuals financially during their time in the hospital. Thus, the function of this insurance type is unique and specifically designed to ease the financial burden of hospitalization.