PSI Ohio Insurance Practice Exam

Which of the following describes a hospital indemnity plan?

1. Pays a percentage of medical expenses

2. Provides a lump sum payment upon diagnosis

3. Pays a fixed amount for each day of hospitalization

4. Covers outpatient surgery costs

The correct answer is: Pays a fixed amount for each day of hospitalization

A hospital indemnity plan is designed to provide financial assistance in the event of hospitalization by offering a fixed daily benefit. This means that for each day a policyholder is hospitalized, they receive a predetermined sum of money, regardless of the actual medical expenses incurred. This fixed amount can help cover costs related to the hospital stay, including additional out-of-pocket expenses that may arise during hospitalization. The structure of the payment allows for budgeting and financial planning when faced with health issues that require hospitalization. Since the benefit amount is set in advance and independent of the specific charges billed by the hospital, it offers a straightforward approach to managing out-of-pocket costs. This feature is beneficial for those who want predictable financial support during their hospital stay. In contrast, other options are characteristic of different types of insurance arrangements; for example, paying a percentage of medical expenses relates to coinsurance found in major medical policies, while a lump sum payment upon diagnosis pertains to critical illness insurance. Additionally, covering outpatient surgery costs refers to policies designed specifically for outpatient services, which is distinct from the focus of hospital indemnity plans.