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An indemnity insurance policy is a type of health insurance plan. A medical indemnity insurance plan is also known as a reimbursement plan because the insurance reimburses the covered individual regardless of where or with whom the covered individual receives health care services from. The insurance company then pays a set portion of your total charges.
DEFINITION: Indemnity health insurance plans are also called fee-for-service. These are the types of plans that primarily existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage. For example, an individual might pay 20 percent for services and the insurance company pays 80 percent.