Illinois Health Insurance Practice Exam

What is the purpose of Hospital Indemnity (income) coverage?

1. Coordination with other coverages

2. Pays benefits at the insured's discretion

3. Supplement to other coverages and pays a stated benefit amount

4. Only covers outpatient services

The correct answer is: Supplement to other coverages and pays a stated benefit amount

Hospital Indemnity coverage is designed to provide a specific, predetermined benefit amount to the insured for each day they are hospitalized or to cover hospital-related expenses. This type of coverage acts as a supplemental insurance policy that fills the gaps left by other health insurance plans, helping policyholders cover direct costs associated with a hospital stay, such as deductibles, copayments, or other out-of-pocket expenses. The focus on a stated benefit amount means that, regardless of actual medical expenses or the benefits provided by primary health insurance, the insured receives a specific payment. This can help alleviate financial stress during a hospital stay and support the insured in managing the costs associated with hospitalization. In contrast to options that suggest coordination with other coverages or limitations to outpatient services, the core purpose of Hospital Indemnity coverage is to provide a financial safety net during inpatient hospitalizations.