Understanding supplemental insurance

Supplemental insurance refers to extra or additional insurance you can purchase for services including out-of-pocket expenses that are not covered by regular insurance. Such plans pay for deductibles, copayments and also coinsurance.

The other supplemental plans offer you cash benefits paid over the course of time or in one lump sum. This money can be used to make up for lost wages and transportation associated to your health condition. It can also be used to pay for food, medication and other expenses you incur during your illness.

Remember that supplemental insurance is just a supplement or add on and not a substitute for regular health insurance. The most popular type of supplemental insurance is Medigap. This is sold by private insurance firms to individuals who are enrolled in Medicare.

Original Medicare, which consists of Part A Hospital Insurance and Part B Medical Insurance, covers many medical expenses but not all. A supplemental insurance policy is required to cover the gaps that are not taken care of by Medicare like copayments, deductibles and coinsurance.

Certain Medigap policies will pay for health services even outside the United States besides covering additional preventive services that are not taken care of by Medicare.

Common types of supplemental insurance:

Besides Medigap policies, there are three other forms of supplemental health insurance that are widely sold in the United States. These are either available as a voluntary benefit from your employer or can be purchased directly from an insurance firm.

The first one is critical illness insurance, which is also referred to as disease-specific insurance. This policy is meant to relax the financial implications of some serious illness like cancer. You may get a lump sum cash to pay for additional costs related to your illness. Based on the specific policy, you can use the coverage to pay for deductibles, travel and lodging expenses if treatment is far away from home, experimental treatment that is usually related to cancer therapy and many more.

The other policy is known as accidental death policy. This includes Accidental Death and Dismemberment Insurance (AD&D) and Accident Health Insurance. These are combined and sold together. Because of local insurance regulations, the benefits may vary from state to state.

With the help of an AD&D policy, you’ll get a lump sum cash benefit in case you are the beneficiary of someone killed in an accident. Accident health insurance is also referred to as accident hospital indemnity policy. This policy will pay for medical expenses because of an accident that is not taken care of by regular health insurance.

The third policy is known as hospital indemnity insurance, commonly referred to as Hospital Confinement Insurance. You’ll get a cash benefit if you are confined to a hospital on account of a serious injury or illness. The cash may be provided as a lump sum, daily or weekly payments.