A lot of young people have a misconception that they don’t need any health Insurance policy since they are still young and are unlikely to be hospitalized and so the premium paid on a health insurance policy is a waste of money. This is completely wrong for many reasons. Here are some of them:
a) Even young people can be sick and require hospitalization as is evident from the unfortunate evidence of life style and epidemic diseases hitting younger people.
b) In any case hospitalization due to accidents can happen at any age.
c) If you wait for something to go wrong with your health before taking a health policy please remember that after something goes wrong (say an afflication with diabetes or blood pressure) you may have great difficulty getting a health policy at all or even if you get it, it will be more expensive or come with restrictive conditions such as partial payments or exclusions that would not be there if you had bought the policy when you were still hale and hearty. Building a long no claim history ensures faster payment of claims when the inevitable claims do happen in later life. Please remember only the most fortunate person will be able to say that the premium on his health policy has got wasted. Unfortunately for most of us the “return” on the health policy premiums is going to be pretty good as claims are almost inevitable over the life time.
In general parlance a health Insurance policy is referred to a policy where the cost of hospitalizations are reimbursed (or paid directly to the hospital) to the policy holder. “Mediclaim” is the popular parlance for such policies though the brand “mediclaim” was made popular by the 4 nationalized general insurance companies.
Life insurance policies on the other hand pays the claim amount to your family in the event of your death during the policy period. So this covers a completely different risk as compared to a health insurance policy.
There are another type of health insurance policy which is equally important though frequently neglected or confused with the above “mediclaim” policies. These are policies (called critical illness policies in local parlance) that will pay the full claim amount if the policy holder is afflicted by the covered serious diseases (such as cancer, stroke, paralysis, multiple schelerosis, etc. ) and survives for 15-30 days after diagnosis. This policy is different from the mediclaim policy as the claim amount is paid without any reference to the expenditure incurred at the time of hospitalization for treatment of the disease. The lump sum received is meant to provide a lump sum amount that can generate income for the policy holder as his income earning capability is seriously affected when he is afflicted by these critical illnesses. Hence the policy amount needs to be as much as the life insurance policy value if not higher. Most people are not even aware of these risks and where they are aware they are satisfied with a policy of a small sum of Rs. 3 lakhs/Rs. 5 lakhs which does not serve the purpose of providing a lump sum to replace the lost income.
In the context of Insurance the golden rule is Never mix Insurance with investment. Which means that insurance is basically meant to protect against an unpleasant (and unforeseen) happening. If it is a insurance policy that pays at an event that you look forward to than it is an investment um insurance policy and in all likelihood has been miss-sold. Another way to find out is a simple test – Was the concerned sales person overeager to sell the product – that is a fairly reliable sign of a miss sale in progress.