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Indemnity insurance is a contractual agreement in which one party guarantees compensation for actual or potential losses or damages sustained by another party. Most commonly, it is an insurance policy designed to protect professionals and business owners when found to be at fault for a specific event such as misjudgment.

Managed care has been replacing indemnity insurance because it is more cost efficient. With indemnity insurance you have to pay out of pocket and give you a limit to the amount of coverage you can receive in a lifetime. However you have more freedom to pick a doctor that you want to treat you. Managed care you have to pick from pre selected healthcare providers. With making deals with healthcare providers to accept these plans they are able to bring down cost.

Health Maintenance Organizations (HMOs) Normally only pays for care if you are within your network. You pay a monthly fee to receive healthcare.

Preferred Provider Organizations (PPOs) Will pay for care within your network, but will also pay some of the cost outside your network. You pay for services as you get them. The healthcare provider will bill your insurance and you have to pay what your deductible does not cover.

Point of Service (POS) With this plan you do not pay a deductible and you pay a small co payment that is inside your network. If you go out of network you will have to pay a deductible and a co payment.