A daily hospital cash allowance policy helps you in getting a fixed sum of money per day of hospitalisation (for example Rs. 2000/- per day of hospitalisation ) irrespective of the amount of expenditure actually incurred during the hospitalisation. This kind of a policy helps you in recovering some of the costs of hospitalsiation that are not reimbursed under a mediclaim policy. For example travel to and from home to hospital , the loss of salary if any incurred by the person attending to the patient, the patient's expenses. Etc
This policy should be taken in addition to and not in lieu of a mediclaim policy.
Be aware about the sum insured. If this is an annual policy it will have a limit on the number of days (or the amount) that can be paid for every year plus some policies may also have a life time limit across the years for which the policy will continue to be issued. It is not correct to compare this lifetime limit with the sum insured. The correct way to get an idea about the sum insured is to see the annual limit if any.
Keep a copy of all documents submitted to the insurance company for your future reference.
Any promise made by the agent or even an official of the insurance company has no value unless it is in writing or at least on email.
So if you are basing your decision on any such promise make sure you get it in record in some form.