What are hospital indemnity plans?

A hospital indemnity plan is an insurance plan that pays a predetermined daily, weekly or monthly amount to policyholders who are under hospital care, according to Humana, an American health insurance company. This type of plan can sometimes cover additional medical expenses, such as copayments and deductibles.

Hospital indemnity plans help reduce out-of-pocket expenses, including transportation and child care costs, that result from unexpected trips to the hospital, states Humana. Some insurance companies offer hospital indemnity plans even for people who already have health insurance. Humana's hospital indemnity plan pays a lump sum when the insured party provides proof of hospitalization.