Short answer
Interior waterproofing (a drainage channel along the basement floor perimeter, tied to a sump pump) is the right fit for most Indianapolis-area homes — it directly addresses the most common leak point, the cove joint, without excavating the yard, and typically costs less. Exterior waterproofing (excavating to the footing and applying a membrane) addresses the problem at the source and is usually reserved for new construction or situations where the yard is already being excavated for another reason.
What each one actually does
Interior systems capture water after it's already entered the basement wall but before it reaches the floor — a channel cut along the base of the wall routes it to a sump pump, which removes it from the house entirely. Exterior systems try to stop water before it reaches the wall at all, by excavating down to the footing and applying a waterproof membrane and drainage board directly against the foundation from outside.
Why interior is usually the practical choice
Excavating an entire foundation perimeter means tearing up landscaping, patios, and anything else along the wall, and it costs significantly more in labor and yard restoration. For an existing home where the goal is simply to stop water from getting into a finished or finishable basement, an interior system solves the actual problem — the cove joint leak — without the disruption or cost of full excavation.
When exterior actually makes more sense
If a home is already having exterior excavation done for another reason — a new patio, a structural repair requiring wall access — it can make sense to waterproof at the same time, since the yard is already open. New construction is also typically waterproofed from outside before backfilling, since it's far cheaper to do it once during the build than to retrofit later.
Frequently asked questions
It addresses water at an earlier point, but for an existing basement, a properly installed interior system is highly effective at the cove joint leaks that account for most residential basement water problems — the difference in outcomes is smaller than the difference in cost and disruption.
Cutting a proper perimeter drain channel at the correct slope, tied into a correctly sized sump pump, is precise work — getting the slope wrong is the most common reason a DIY or poorly installed system underperforms.
It should — the drain system and the pump work together as one system, not two separate purchases.