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Hospital indemnity insurance vs. gap insurance: a brief comparison

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Most people know that an inpatient hospital stay is expensive, but they may not realize just how expensive it can be. Recent data from the CDC shows that the average bill for an inpatient stay at a local community hospital is $14,101.1 It's safe to say that receiving a bill for this amount would be a financial burden for most people even if they have health insurance.

That's why more and more people have begun to look for coverage options that supplement their existing health insurance. However, differentiating between the different types of available supplemental benefits can often be difficult and time-consuming.

We've put together this article to help you better understand hospital indemnity insurance and gap insurance, two types of coverage that are designed to help pay for additional costs incurred from a hospital stay that may not be covered by traditional health insurance.

Nurse standing beside a patients bed, both smiling.

Hospital indemnity insurance

Hospital Indemnity insurance pays a flat rate per day for a qualified hospital stay. If you meet the specific criteria outlined by your plan, you will receive a lump-sum payout after the conclusion of your stay based on the number of days you spent in the hospital. This lump-sum payout is yours to spend however you want—you are free to use the money to pay for deductibles, copays, coinsurance, parking expenses, travel costs or any other expenses you incurred during your stay. There are no limitations on how you can spend the money you receive.

After a health emergency, Lorraine had to spend four days in the hospital. While her health insurance provided her with a level of financial protection, she was left with some expenses that her health insurance didn't cover: parking fees, child care, deductibles, copays and coinsurance.

Thankfully, Lorraine was enrolled in hospital indemnity insurance through her employer. After she filed a claim, her hospital indemnity insurance carrier paid her a lump-sum benefit based on the number of days she spent in the hospital. She used this money to help pay for the various expenses she incurred that weren't covered by her health insurance.

Gap insurance

Gap insurance is designed to cover the gap between the amount paid by your health insurance carrier and the out-of-pocket amount you're responsible for paying. This coverage reimburses enrollees for a portion of the deductibles, copays, and/or coinsurance amounts that are due following a hospital stay.

Unlike some other types of insurance which only cover inpatient stays, gap insurance can help pay for out-of-pocket expenses that are incurred after inpatient or outpatient care. Details may vary based on the carrier and coverage plan.

After a car accident, Dylan was rushed to the hospital for surgery and an overnight stay for observation. He had medical insurance to help offset most of the costs associated with his stay, but he was still responsible for paying a deductible and coinsurance.

Since Dylan was enrolled in gap insurance, he was reimbursed for a portion of these additional expenses. Without this valuable coverage, he may have been responsible for paying the entire deductible and coinsurance amounts out of his own pocket.

Table comparing hospital indemnity insurance vs gap insurance

Hospital Indemnity Insurance and Gap Insurance from Allstate Benefits

Allstate Benefits is proud to offer comprehensive Hospital Indemnity Insurance and Gap Insurance options. Contact an agent today to learn more about our products or click here to request a quote.

1Hospitalization - Health, United States (cdc.gov)

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