What is Indemnity Health Insurance?

Indemnity health insurance is simply the kind of policy that pays for your actual hospital expenses. Whether it’s a minor surgery or a major procedure, if it’s covered and within your sum insured, the insurer pays the bill.

In fact, this is what most people imagine when they think of “health insurance.” The word “indemnity” might sound technical, but don’t let it spook you - it’s just the formal term for regular health insurance plans that settle real medical bills.

Here’s a quick example: Let’s say you have a ₹15 lakh plan from HDFC ERGO Optima Secure. You’re admitted for dengue, and the hospital bill comes to ₹1.2 lakh.

• The insurer verifies your claim.
• Once approved, they pay the ₹1.2 lakh 
• The rest of your cover (₹13.8 lakh) stays available for future claims that year.

Heads up! We know that life insurance can be overwhelming – but it doesn’t have to be! Our IRDAI-certified advisors at Ditto assess your requirements and can help you pick the right policy. And the best part? We don’t spam or pressure you to buy.

Wait — is there another kind of health insurance?

Yes. They’re called fixed benefit plans. And they work very differently.

Take HDFC ERGO’s Critical Illness Platinum Care Plan with a ₹10 lakh cover. Suppose you’re diagnosed with an invasive early-stage cancer — one of the listed conditions under the policy.

Even if your treatment costs just ₹3 lakh, the insurer pays you ₹10 lakh upfront the moment you’re diagnosed with cancer. You can use that money for recovery, non-medical expenses, or anything else.

That’s what makes it a fixed benefit plan i.e. the payout is fixed, regardless of the bill.

Indemnity vs Fixed Benefit: What's the Real Difference for You?

At Ditto, we think an indemnity health insurance plan is non-negotiable.

It’s the only kind of health insurance that pays your actual medical bills — room rent, surgery, ICU, doctor consultation charges, and more. In the event of a hospitalisation, this is the plan that prevents you from paying out of pocket.

But here’s the thing: medical expenses aren’t the only cost you incur during a serious illness or injury. You might need to:

• Take time off work (loss of income)
• Travel to a specialised hospital in another city
• Hire help for recovery at home
• Cover non-admissible costs like food and admission charges.

This is where fixed benefit health plans could come in. They pay you a lump sum on diagnosis — money that you can use for anything, not just medical bills.

What should you buy–Indemnity or fixed benefit?

Indemnity plans, as we already noted, are non-negotiable. But we don’t recommend buying standalone fixed benefit health plans. Instead, we suggest adding a fixed benefit rider — like critical illness — to your term insurance. And here’s why:

1. Term-linked Riders are More Cost-effective

When you buy a critical illness rider with a term plan like ICICI iProtect Smart Plus or Bajaj Allianz e-Touch II, the term plan and rider premiums are locked for the entire duration. However, the rider coverage may be limited to a maximum of 20 years, still offering protection during your early working years and giving you ample time to build your savings and emergency corpus. 

Standalone plans like HDFC ERGO’s Critical Illness Platinum Care, on the other hand, have premiums that increase as you age, just like regular health insurance. Over time, this makes them far more expensive for the same coverage.

2. Term-linked Riders Cover More Illnesses

The critical illness rider under HDFC Life Click 2 Protect Supreme (60 illnesses), ICICI iProtect Smart Plus (60 illnesses), and Axis Max Life Smart Term Plan Plus (64 illnesses) covers a wide range of conditions, including both early- and late-stage cancer, cardiac, and neurological diseases. 

HDFC ERGO’s standalone plan only covers 15 illnesses, and most are limited to late-stage severity.

Bottom line:You definitely need an indemnity health insurance plan. If you’re looking for fixed benefits, go for a critical illness rider on your term plan. The only time to consider a standalone fixed benefit health plan is if you don’t qualify for a term policy due to medical or underwriting restrictions.

How to File a Claim on an Indemnity Health Insurance Plan?

Indemnity health insurance plans pay whatever the hospital actually charges, so getting the process right is critical. Here’s the streamlined, field-tested playbook we use when guiding 1,000+ Ditto customers through claims every year.

1. Intimate the Insurer—Fast

• Emergency admission: Call, email, or use the insurer’s app within 24 hours of hospitalisation.
• Planned surgery: Submit a pre-authorisation request 48–72 hours before admission.

Early intimation keeps the cashless option alive and avoids claim delays. You can also loop in your intermediary here. 

2. Use a Network Hospital for Cashless Treatment

1. Show your health card or policy number at the TPA desk.
2. The hospital sends a pre-auth form; the insurer must reply within the IRDAI-mandated three-hour window.
3. After approval, you pay only non-admissible items and sign the discharge papers.
   1. Some network hospitals may ask for a refundable security deposit (₹5k–₹50k). This isn’t mandatory but is common in practice.

3. No Network Hospital or Cashless Denied? File for Reimbursement

• Pay all bills yourself and save every receipt.
• Submit the claim form with originals within 30 days of discharge (a few insurers allow 60 Depending on the circumstances).
• Insurers aim to settle in 15–30 days, but our data shows 2 in 5 reimbursement claims cross the 30-day mark. This is another reason cashless is preferable whenever possible.

4. Keep this Document Kit Ready (originals)

• Completed and signed claim form
• Photo ID (Aadhaar, PAN, passport)
• Doctor’s admission note and prescriptions
  Final hospital bill, payment receipts, and discharge summary
• Pharmacy invoices, diagnostic reports, investigation films
• Indoor case papers (ICP)
• FIR/police report and post-mortem (for accident or death claims)
• Any additional documents the insurer requests

Best Indemnity Health Insurance Plans

We asked our advisors to review over 200 indemnity health insurance plans to identify the best-performing options for 2025. After evaluating coverage, pricing, claim experience, and hospital network strength, here’s the list they recommend.

It’s easy to get lost comparing policies, riders, and premiums. Instead of spending hours on it, why not get personalised insurance advice from Ditto? We offer free consultations with zero spam! Just 30 minutes to clarify all your doubts. Book a free call now!

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