What is Hospital Indemnity Insurance?

Hospital indemnity insurance is sold by private insurance companies and can help you cover your out-of-pocket hospital costs not covered under Medicare or Medicare Advantage.

Original Medicare and Medicare Advantage plans have limitations to the amount they will pay toward hospital stays.

Original Medicare covers 90 days hospitalization with an additional 60 days that include high coinsurance — $838 per day in 2025 — that you have to pay out of your own pocket.

If your doctor hospitalizes you for observation, Medicare will generally not cover that hospital stay. The costs of an observation stay can add up quickly and you may be responsible for paying the full amount.

Hospital indemnity insurance can help cover those costs. When you purchase these private policies, you choose how much daily coverage you want.

The more coverage you want, the higher your premiums. If you are hospitalized, the policy pays an agreed upon rate for each day you’re in the hospital.

Different hospital indemnity insurance plans offer benefits beyond inpatient hospitalization. These options may cost more, but they can cover out-of-pocket costs for specific situations your Original Medicare or Medicare Advantage may not.

It’s important to consider what options you want and whether or not your other plans cover what you believe you will need in the future.

Be sure to ask for the options you think you will need and compare supplemental insurance if you are considering an indemnity plan.

Medicare Advantage plans may impose additional out-of-pocket costs if you have an accident, long-term illness or other hospital stay. You may face large copays for your first few days in the hospital. Your deductibles, copayments and coinsurance can add up quickly.

Your maximum out-of-pocket (MOOP) expenses can be over $13,000 for a hospital stay.

Hospital indemnity insurance pays you a fixed amount for each day you’re hospitalized to help offset your MOOP.

But hospital indemnity is not for everyone on Medicare Advantage. You should look closely at your Medicare Advantage plan and compare it to the indemnity plan you are considering to see if it fits your needs.