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Indemnity Plans-All You Have To Know

Indemnity insurance plans are those types of insurance plans that offer compensation to a particular insured party for certain unprecedented losses or damages up to a certain specified limit. This limit is generally equivalent to the amount of loss incurred. It offers coverage to the third party to cope up with the damages and losses incurred while rendering specific professional services. To avail of the benefits of indemnity plans, you have to pay a pre-fixed premium amount for a fixed tenure, just like any other plan.

The indemnity facilities are normally more practised by businessmen and professionals. They frequently carry the risk of malpractice or misjudgment, leading to heavy losses and damages. The usage of the letter of indemnity is popular under such circumstances.

Indemnity-type plans are most popularly observed in health insurance. Indemnity based health insurances are popularly termed as mediclaim policies, traditional indemnity plans or fee-for-service plans. These plans pay for the hospitalization expenses up to the plan limit. This implies that the insurer requires to pay anything excess than the policy limit. This plan can be an individual plan, or family plan or a plan exclusively designed for senior citizens, acting as a safeguard against unprecedented medical expenses.

What is an indemnity health insurance plan?

A comprehensive health insurance plan which pays only for the expenses incurred in hospitalization is called an indemnity health insurance plan. This is contrary to a fixed benefit health insurance plan wherein the entire sum insured would be paid irrespective of the number of expenses incurred. This is the most common type of health insurance plan available in India.

Clauses of Indemnity plans

Comprehensive health insurance indemnity plans might have these clauses, which need  to be taken care of:

  1. Deductibles:
    This clause implies that the insurance company will deduct a certain sum from those charges that will be reimbursed, settling the remaining claim. It is not necessary that all indemnity plans will bear this deductible clause, nor is there any fixation regarding the percentage of deduction.  It depends on the company’s approach and varies from one company to another.
  2. Co-payment:
    This implies that a certain percentage of the total cost incurred needs to be paid by the policyholder and the remaining will be covered by the concerned insurance company. The general trend shows that senior citizen health plans bear this clause. However, this also depends on the company’s plan and practice.

Key benefits of comprehensive health insurance indemnity plans

  1. Allows you to undergo treatment under any registered network hospital
  2. Cashless treatments are possible if treated under a network hospital
  3. Even without the cashless treatment facility, you are allowed to take treatment wherever you feel comfortable. There is no restriction in this sort of policy.
  4. Indemnity health plans allow tax benefits under Section 80D
  5. Flexible plans to ensure the health insurance of the entire family
  6. Allows extensive coverage covering a wide range of ailments
  7. the premium rates are reasonable when compared to other types of plans, because of the deductible clause and shared payment option


How does an indemnity plan work?

An indemnity plan allows you to seek consultation for whoever doctors or clinics you may desire without any special referral. The company will impose any necessity of one particular primary care physician. This plan may require you to make the payment initially which will be later settled by the insurance company. This generally does not work in the case of cashless treatment.

You may need to pay an annual deductible charge prior to claim settlement of the concerned insurance company. Once this deductible limit is achieved, the company will automatically set your claims based on the chosen percentage of the UCR, “usual, customary and reasonable rate”, to fulfil the services.

Who needs a Comprehensive health insurance indemnity plan?

A person can ideally choose an indemnity plan under the following circumstances:

  • In case you are seeking the highest level of freedom in your choice of doctors and hospitals
  • You are not willing to designate any particular primary care doctor or consider any referrals for getting treatments at your desired place
  • You do not want any imposition regarding your visit to your desired doctor


Disadvantages of Comprehensive health insurance indemnity plans

Since indemnity health plans pay only for the expenses incurred, it doesn’t account for the income lost due to the illness or other psychological parameters. Hence, an indemnity plan needs to be taken along with a fixed benefit plan for comprehensive coverage.

To wrap it up

This is a comprehensive guide to health indemnity plans, offering safeguarded protection against unprecedented medical expenses. If you are seeking health insurance offering optimum coverage at an affordable premium, then an indemnity policy is your choice. But, you have to consider all the clauses and other relevant factors before you settle to buy any particular plan. The finer terms and conditions differ from company to company. Moreover, you must do your research well to avoid any misunderstanding and clarify all doubts and ambiguities beforehand.

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