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Indemnity Health Insurance Plans – Highlights & Limitations

Written by - Akshatha Sajumon

February 23, 2022 6 minutes

Insurance is an essential investment for every person to safeguard their financial future and that of their family. While life insurance or term insurance is one of the most popular types of insurance in India, health insurance has also gained a lot of popularity for many years. The recent pandemic has further stressed the importance of having a good health insurance plan. 

There are many types of health insurance plans available from multiple insurers. One of the most common types of health insurance is indemnity plans. Given below are a few details of indemnity plans and the target audience for them.

What are indemnity based health insurance plans?

The core meaning of the word indemnity is protection against any financial loss. Indemnity plans are based on the same idea. This type of health insurance provides coverage for the actual expenses of hospitalization incurred by the insured person. Policyholders can opt for cashless hospitalization too. In such cases, they will not have to pay any amount (or a minimum fixed amount as per the policy terms of the insurer) at the time of hospital admission. If the policyholder does not opt for cashless hospitalization, then they will have to submit all the necessary documents like medical reports, hospital bills, etc. the compensation for the actual expenses will be based on such documents.  

What are the highlights of indemnity based health insurance plans?

Indemnity plans provide basic health insurance to the policyholders. The majority of health insurance plans or medical plans currently available in the market are indemnity based plans. Some of the highlights of these plans are mentioned below.

a. Reduced premiums

The premiums to be paid on the indemnity plans are lower as compared to other types of health insurance plans. In most indemnity plans, the policyholder shares a portion of the risk or the cost of treatment and the balance has to be paid by the insurer. This reduces the risk of the insurer and results in a reduction of the premium amount.

b. Cheaper hospitalization

The cost of healthcare in our country is ever increasing. This has further been highlighted by the Covid 19 pandemic where many people could not afford to get adequate medical attention in private hospitals. Health insurance in such cases can be of huge help. It makes private hospitalization cheaper and thus provides better access to good private hospitals. 

c. Option to choose family floaters and individual plans 

Indemnity plans are available for individuals or for the entire family. Individual plans have to be bought in the name of the person to be insured. Family floater plans on the other hand can be used to provide health insurance coverage for the entire family and the premium amount will be higher than individual plans after factoring in many factors like the number of persons to be insured, maximum age of the person on the plan, etc. 

d. Better flexibility

Another important benefit of indemnity plans is the flexibility to choose the hospital or the doctor to get medical aid. This flexibility ensures that timely medical attention is provided to the insured person and their family members covered under the plan without any unnecessary delay. 

What are the limitations of indemnity plans?

Indemnity plans are the most common type of health insurance plan in India. These plans provide the actual cost of hospitalization to the policyholders thereby easing their financial burden. However, there are certain limitations to the indemnity plans. Some of such limitations are discussed below.

  1. The first and foremost limitation of the indemnity plan is the limited coverage that is provided under the plan. These plans do not provide pre hospitalization or post hospitalization expenses. 
  2. Documentation is another hurdle or limitation that is faced in an indemnity plan. The insured person needs to provide extensive and exact documentation in order to raise a claim under the plan. These documents will be duly verified by the insurers before settling the claim
  3. Like any other health plan, there are certain specific exclusions where the insurer is not liable to settle the claims raised. If the insured person or any other person covered under the plan has a specific medical condition, then the claim will not be settled.   

Who should go in for indemnity plans?

Health insurance is important for every person and their family members. Indemnity plan help in getting compensation for the cost of hospitalization without any pre or post hospitalization expenses. These plans are a good option for people looking for coverage of maximum ailments and illnesses as well as hospitalization expenses at lower premiums. These plans also provide huge flexibility in choosing the hospitals and doctors to get the medical attention. Hence, it can also be useful for people looking for greater flexibility in their health insurance plans. 


Getting a good health insurance plan has become a necessity in todays’ world. Yet in India, the majority population still does not have a good health insurance policy. Although there is an increase in the number of people opting for health insurance plans, there is still a long way to go in terms of awareness of the need for health insurance and its benefits. Indemnity plans in such cases can be used as a protection against the huge medical costs in our country and can also provide coverage for agreed medical conditions. 


1. Does the indemnity plan provide coverage for Covid 19?

A. IRDAI has come out with an indemnity based plan to provide protection against COvid 19. This plan is known as the Corona Kavach or the standard Covid 19 health insurance plan. This plan is available with all the registered insurers in India.

2. Does an indemnity plan have tax benefits?

A. Yes. Policyholders are eligible for deduction under section 80D of up to Rs 25,000 (Rs. 50,000 in case of parents above the age of 60).

3. Can an indemnity plan be bought for the family?

A. Yes. Indemnity plans can be bought to provide coverage for the entire family. The term family will include the spouse, children, and parents of the insured person.

4. Can a person take multiple indemnity plans?

A. Yes. A person is allowed to take more than one indemnity plan. At the time of raising a claim, such a person will have to select the policy under which the claim is to be made first. An important point to be noted for multiple indemnity plans is that all the insurers involved have to be informed of each indemnity plan taken by the policyholder.

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