Hospital Indemnity insurance, also called Hospitalization insurance or Hospital insurance, is a plan that pays you benefits when you are confined to a hospital, whether for planned or unplanned reasons, or for other medical services, depending on the policy.The plan pays cash directly to employees even if they don’t incur any out-of-pocket expenses. The payments can be used for any purpose, including: Medical copays, Deductibles, Regular expenses: such as food, rent, and utilities.