Indemnity Cover Vs Defined-benefit Cover

To ensure optimum financial protection against soaring medical costs, one requires owning both the indemnity as well as the defined-benefit type of health plans.  However, before coming to that, let’s decode both the terms.

Decoding Indemnity and Defined-benefit insurance

With health care expenses skyrocketing, managing these expenses without breaking your banks can be next to impossible if you don’t own health insurance. It offers the much-needed financial protection by covering you for the incurred expenses.

Health insurance is further categorised into Indemnity insurance and Defined-benefit insurance.

> Indemnity Insurance:

A basic health insurance that reimburses the expenses incurred during hospitalisation is called indemnity insurance. You can use this policy to claim up to the sum insured, including the pre and post hospitalisation expenses.

> Defined-benefit Policy:

On the other hand, under a defined-benefit plan, the insured is paid up to a stipulated sum on the detection of the illness. This amount can be used either in treatment or cover the other household expenses. Policies such as critical illness plan, hospital cash policy, and major surgical benefit policy are the examples of a defined-benefit plan.

What’ in Store for You! - Let’s consider the list of coverage under both plans:

> Indemnity Insurance:

Indemnity insurance plans are usually the mediclaim policy which can be availed for individual, family, senior citizen, and children.

The policy covers: Hospitalisation expenses including inpatient expenses, room rent, nursing expenses, doctors charge, ICU charge, OT charges, X-ray expenses, medicine and injection cost, ambulance cost etc. It covers pre and post-hospitalisation expenses as well. You can claim the policy up to the sum insured. Anything above the sum insured will be on you.

> Defined-benefit Plan

One of the most popular plans is critical illness plan which works as per the principle of defined-benefit. Under this type of insurance, the insured is paid a lump sum on the detection of an illness. It covers the person for a couple of listed illnesses up to a capped amount. These plans also come with a survival clause where the insured needs to survive up to a definite time after he/she is diagnosed to enjoy the insurance benefits.

Choosing between the two

Both the policy comes with their unique features and choosing between the two could be as per the insurance needs of the insured. For example, if you have a family history of specific illness, a defined-benefit plan would be the ideal choice to cater to your needs. However, clubbing this policy with your basic health insurance policy could further enhance the policy coverage and will ensure comprehensive financial protection in case of an emergency.

Since the claim rejection ratio in case of defined-benefit policy is lower, merging both the policies will by any means give widespread health coverage. Moreover, pre and post hospitalisation coverage will no more remain limited. Hence, choosing between both plans should only be done on the basis of your healthcare needs.

The Final Call!

No plan comes with the same features. Different health insurance policies cater to the different needs of the individual. When an indemnity health insurance, be it family floater or mediclaim insurance, performs as the core healthcare portfolio, topping it up with a defined-benefit plans like critical illness insurance, or  daily hospital allowance plan would be a good idea. However, it is entirely your call, which should be based on a firm evaluation of your needs!