Indemnity plans, also called Fee-for-Service or Traditional Health Insurance, have been used by many, especially before Managed Care plans became so popular, because an Indemnity plan allows people to choose their own doctor and hospital. This feature is very appealing to many because people feel more secure with doctors and hospitals they already trust.

In Traditional Indemnity plans, people would usually pay a smaller percentage of their health expenses, the coinsurance, only after they have paid their annual deductible. When a person’s expenses, however, turned out to be more than the usual expected bills, the person will have to pay the extra expenses plus the coinsurance. Indemnity plans pay for medical services, prescriptions and medical tests but do not usually cover preventive care expenses.