What Is The Difference Between Benefits Paid On The Reimbursement Method And The Indemnity Method?

UPDATED: Jul 19, 2023Fact Checked

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Jeffrey Johnson

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 19, 2023

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UPDATED: Jul 19, 2023Fact Checked

Under the indemnity method, once you are eligible to receive benefits, the company will pay you the amount specified in the policy, regardless of the cost of service. Under the reimbursement method, the insurer will pay all or a portion of the actual expenses you incur, up to the maximum stated in the policy.

Case Studies: Understanding the Difference Between Indemnity and Reimbursement Methods

Case Study 1: Indemnity Method

Sarah has a health insurance policy that operates on the indemnity method. She recently underwent surgery and incurred medical expenses totaling $10,000. According to her policy, she is eligible for benefits up to $8,000. Under the indemnity method, the insurance company will pay Sarah the full $8,000, regardless of the actual cost of the services she received.

Case Study 2: Reimbursement Method

John has a different health insurance policy that follows the reimbursement method. He had a medical procedure that cost him $5,000. According to his policy, the insurer will reimburse him for 80% of his actual expenses, up to a maximum of $4,000. In this case, John will receive a reimbursement of $4,000, which is 80% of his incurred expenses.

Case Study 3: Comparing Methods

Lisa and Mark both have health insurance policies, but they differ in the method of benefit payment. Lisa’s policy follows the indemnity method, while Mark’s policy uses the reimbursement method. They both underwent the same medical treatment that cost them $6,000. Lisa’s policy provides a benefit of $5,000, while Mark’s policy covers 90% of actual expenses, up to a maximum of $4,500.

Under the indemnity method, Lisa will receive the full $5,000, regardless of the actual cost. On the other hand, Mark will be reimbursed for 90% of his $6,000 expenses, which amounts to $5,400. Despite incurring the same medical costs, their policies and benefit payment methods result in different outcomes.

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Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

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