Many people who are looking into health insurance find that they are faced with a number of different policies and options. Before long, they find themselves wondering what the difference is between certain policies, and asking questions like “What is hospital indemnity insurance?” and “What is critical illness insurance?”

This article will explore how both critical illness insurance and hospital indemnity insurance work, highlighting each policy’s unique benefits and drawbacks, helping those who are considering insurance to make an informed decision and choose coverage that aligns well with their needs.

Critical illness vs. hospital indemnity Insurance

Critical illness insurance and hospital indemnity insurance are both enhanced supplemental health insurance policies designed to help fill gaps in coverage and help with specific situations. Critical illness insurance provides a payout when the policyholder is diagnosed with a qualifying illness, while hospital indemnity insurance helps to cover the cost of hospital stays.

What is critical illness insurance?

Critical illness insurance is a supplemental health insurance policy that provides a payout if the policyholder is diagnosed with a qualifying illness or medical condition. Policies typically pay out either as a lump sum or in monthly payments. The funds can typically be used for any purpose, such as helping cover medical expenses not included in the health insurance policy, hospital stays, or even helping with loss income.

Benefits and drawbacks of critical illness insurance

Benefits:

• Flexible use: Critical illness payouts can be used for almost anything, not just medical costs. For example, it can help with lost income.
• Payout options: Some insurers allow the policyholder to choose between a lump sum or monthly payments, depending on their needs. A monthly payout might be better if long-term treatment is required and the policyholder prefers not to manage a large lump sum.
• Broad coverage: Critical illness insurance helps cover a wide range of illnesses and may not require hospitalization.
• Affordability: Premiums for critical illness insurance are generally low, making it a cost-effective way to help gain financial protection.
• Coverage for recurring illnesses: Some insurers offer policies that may help cover recurrences of previous illnesses or new diagnoses.

Drawbacks:

• Limited coverage: Not all illnesses are covered, and some may be excluded, leaving gaps in coverage.
• No injury coverage: Critical illness insurance typically does not cover injuries.
• Overlap with disability insurance: If the policyholder already has disability insurance, critical illness insurance may duplicate some benefits, reducing its cost-effectiveness.

What is hospital indemnity insurance?

Hospital indemnity insurance is a supplemental policy that provides a cash benefit to help offset the costs of hospital stays.

Benefits and drawbacks of hospital indemnity insurance

Benefits:

• Fewer limitations on conditions or injuries: Hospital indemnity insurance may not require a specific illness or injury for a payout.
• No network restrictions: Since the benefit is paid directly to the policyholder, unless otherwise assigned, there are typically no restrictions on which hospitals one can visit.
• Help with loss of income: Hospital stays can result in lost income if the policyholder is unable to work. Hospital indemnity insurance can help compensate for this loss.

Drawbacks:

Consider these drawbacks to answer the question, “Is hospital indemnity insurance worth it?”

• Only pays for hospital stays: Policyholders won’t receive a payout unless they are hospitalized, even if they have a diagnosis that doesn’t require inpatient care. This limits its utility for non-hospitalized conditions.
• Lower payouts: Hospital indemnity benefits are generally smaller than those of critical illness insurance, so the policyholder may still need to rely on other insurance or savings to cover all hospital-related costs.
• Not ideal for unpredictable expenses: Since hospital indemnity insurance offers a predetermined daily benefit, it may be harder to cover unexpected costs that arise during hospitalization.

The bottom line

Neither type of policy is universally better; the right choice depends on the individual’s health and financial situation. Critical illness insurance can help make it easier to manage the costs of a serious illness, even if hospitalization doesn’t occur. This could be an option to consider if the policyholder has a family history of specific illnesses.

Hospital indemnity insurance, on the other hand, helps provides financial support when the policyholder is admitted to the hospital. It has a narrower window of use, as it’s tied to hospitalization, but doesn’t require a formal diagnosis of a critical illness. It may be better suited to those with a lower risk of chronic conditions but who want protection against unexpected events like accidents.

In some cases, people may choose both policies to cover a broader range of potential scenarios and help maximize financial protection. Ultimately, it’s wise for an individual to consider their current ability to cover the costs of a critical illness or hospital stay and plan their supplemental coverage accordingly.

Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.

74000: Specified Health Event: In Delaware, Policies A74100DE, A74200DE, A74300DE. In Idaho, Policies A74100ID, A74200ID, A74300ID. In Oklahoma, Policies A74100OK, A74200OK, A74300OK. In Virginia, Policies A74100VA, A74200VA, A74300VA. 73100: Lump Sum CI: In Delaware, Policies A73100DE & A7310HDE. In Idaho, Policies A73100ID & A7310HID. In Oklahoma, Policies A73100OK & A7310HOK. In Virginia, Policy A73100VA & A7310HVA. B71000: In Delaware, Policies B71100, B71200, B7130H & B7140H. In Oklahoma, Policies B71100OK, B71200OK, B7130HOK & B7140HOK.

Hospital: B4000: In Delaware, Policies B40100DE & B4010HDE. In Idaho, Policies B40100ID & B4010HID. In Oklahoma, Policies B40100OK & B4010HOK. In Virginia, Policies B40100VA & B4010HVA.

Coverage underwritten by Tier One Insurance Company. Tier One Insurance Company is part of the Aflac family of insurers. In California, Tier One Insurance does business as Tier One Insurance Life Insurance Company (Tier One NAIC 92908).

Critical Illness: In Delaware, Policy T71000. In Oklahoma, Policy T71000OK. In Virginia, Policy T71100VA. Not available in ID or NY.

Tier One does not offer Hospital Indemnity Insurance.

Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY, VA or VT.

Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.

Aflac WWHQ | Tier One Insurance Company | 1932 Wynnton Road | Columbus, GA 31999

Z2401086                                                                                                                Exp. 12/25

Contact Information:
Senior PR & Corporate Communications
Contact: Angie Blackmar, 706-392-2097 or ablackmar2@aflac.com