Hospital Indemnity Policy vs Disability Income Protection

We’ve all seen the silly duck (or is it a goose?) advertising cash in your pocket because of an illness or accident, but what exactly is a Hospital Indemnity Policy and how does it compare to Disability Income Protection?

Although qualified as “insurance” a Hospital Indemnity Policy is actually a cash benefit plan that pays directly to the insured (you) in the case of hospital confinement. Most folks purchase an indemnity plan to help offset the co-pay and deductible costs associated with their major medical insurance.

Based on what you purchase, these plans have a daily benefit that begins to pay out after the selected waiting period (number of days you’re in the hospital before the plan kicks in). Some pay from day one.

EXAMPLE: Your hospital stay is 2 weeks and you have a 3-day waiting period, the policy will begin paying on day 4 of your hospital stay.

Many of these plans are reimbursement policies, which means you pay the bills and send in your receipts and the company will reimburse your expenses.

*Covered Expenses include: Hospital Confinement, Short stays, Observation Stays, Inpatient Mental Health stays, Emergency Room visits (due to accident or injury).

*Additional Coverage (Riders) available on these policies include: Lump Sum Cancer Rider, Skilled Nursing Facility, Ambulance, Dental/Vision, Lump Sum Hospital Confinement, Outpatient Surgery.

Though they have similar benefits, Hospital Indemnity Policy should not be confused with Disability Income protection.

A DI policy will pay the selected monetary benefits (weekly, bi-weekly, monthly) for a covered disability.

EXAMPLE: You are injured at a sporting event and can’t work for 6 weeks. Since this is not covered under a Workman’s Comp program, the daily, weekly or monthly benefits will kick in, after the waiting period, to help supplement the income you’re not getting because of being unable to work.

In many instances, even if you are hurt on the job and receiving Worker’s Comp benefits, a DI policy will pay also.

One thing to watch though, many of the benefits paid by these types of policies can be counted as taxable income so be sure to check with a financial advisor if you’re looking to purchase a Hospital Indemnity plan and/or Disability Income Protection.

If you’d like more information on a Hospital Indemnity and/or Disability Income insurance plan, give us a call. If we can’t help you, we’ll find someone who can.

Until next time take care and remember…. Waiting until a loss occurs can have devastating results so think ahead and be prepared!

Tommy Curtis and Staff
*Benefits vary by Company and Plan

This material has been provided for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.