Indemnity

It is important to have a health insurance plan, especially so if you lead a sedentary lifestyle. Hence, you should get one while you are young and fit.

Medical emergencies can occur at times when you least expect them. This is when a health cover keeps you protected. Many of us consider health insurance as wasteful expenditure, but it forms part of your financial planning and safeguards your savings and investments during such times.

We often come across the term ‘indemnity’ in the context of insurance and might have wondered, “What is indemnity?” or “What is the meaning of indemnity?”

The dictionary defines ‘indemnity’ as ‘security or protection against a loss or other financial burden’. This is what forms the basis of insurance. Indemnity reimburses the amount you spend on medical expenses (subject to conditions) under your health insurance cover.

Most insurers have indemnity plans that make the feature available to the people at large. Indemnity health insurance is one among different types of health insurance plans available in the market. Alternatively, it is termed as a ‘fee-for-service’ plan.

Mr. Suresh obtains an indemnity health cover for his family with a sum assured of Rs25 lakh. A family member, who is covered under the insurance cover, avails treatment and the hospitalization expenses amount to Rs17 lakh. The amount so incurred will be reimbursed by the insurer and the balance sum of Rs8 lakh will remain available for future use.

The advantage of buying an indemnity plan over a fixed benefit plan is that you are free to select a medical professional of your choice along with treatment facilities available under the health insurance policy. Indemnity health cover is suited for those who like to enjoy the freedom to opt for specialized medical facilities and services of their choice.

On the other hand, there are health insurance plans that offer a defined benefit to the insured. They are also known as fixed-benefit plans. They do not follow the principle of indemnity and offer a fixed lump sum amount (subject to the sum insured) when the insured suffers from a specified health condition. The insurers predetermine the diseases that are covered by the health cover under a fixed benefit plan.

Citing the above example, had Mr. Suresh opted for a defined benefit plan. On the occurrence of the ailment, as listed in the policy document, Mr. Suresh would have received the entire sum of Rs25 lakh.

Defined benefits are generally awarded for critical illness insurance or specific disease insurance like cancer insurance.

Make sure you secure the future for yourself and your family by selecting a policy that best fits your needs. Who doesn’t want to get compensated for hospitalization in times of emergencies? Choose wisely!

While you learn about indemnity, you can also know more on other topics like Dependents, E-Insurance Account, and more. Click here to head over to our glossary section for health insurance.