South Carolina Life and Health Practice Exam

What does an indemnity plan provide the insured?

1. A specific service at no cost

2. A specific dollar amount for services

3. A percentage of the total service fee

4. Free coverage for dependents

The correct answer is: A specific dollar amount for services

An indemnity plan provides the insured with a specific dollar amount for services rendered. This type of health insurance allows the policyholder to pay for medical services upfront and then submit a claim for reimbursement based on the predefined benefits of the policy. Indemnity plans typically outline the maximum amount that can be reimbursed for various types of services, giving the insured clarity on how much they can expect to receive back after expenses are incurred. This model distinguishes indemnity plans from other types of coverage that might offer services at no cost (which would not be a feature of indemnity plans), or coverage based on a percentage of total service fees, which could be associated with other types of health insurance like managed care plans. Additionally, indemnity plans do not inherently provide free coverage for dependents, which is generally an aspect of group insurance policies rather than indemnity plans specifically.