Editor’s Note: Is Your Safety Net Safe?

Ask any advisor and they will tell you that a financial plan is incomplete without a safety net. Every twine, loop and knot in this net has a role to play in how secure it is. A single loose end has the potential to push your hard-earned savings into the abyss of uncertainty.

Typically, an emergency fund, and life and health insurance are enough to build a basic safety net. While the importance of none can be denied, let’s talk about health insurance, an important pillar that can save you from penury and despair, given the rising health costs and incidences of diseases.

According to the Economic Survey 2024-25, the total health expenditure in financial year 2021-22 is estimated to be Rs 9,04,461 crore (3.8 per cent of the GDP and Rs 6,602 per capita at current prices). The share of government health expenditure in the total health expenditure has increased from 29 per cent to 48 per cent between FY15 and FY22. Assuming the government spent 48 per cent of Rs 9,04,461 crore (around Rs 4,34,141 crore), out-of-pocket expenses by Indians were a staggering Rs 4,70,319 crore. Cases of people losing all their savings on the medical treatment of a family member abound.

Scarily enough, incidences of life-threatening diseases like heart ailments and cancer are becoming commonplace. Sample this: in a reply in Parliament in March 2025, Minister Of State in the Ministry Of Health And Family Welfare Prataparao Jadhav said, quoting the Global Cancer Observatory, the international agency for research on cancer, that the estimated incidence of cancer cases in India (98.5 per 100,000) accounts for the third highest after China and the US.

It is natural then to get rattled by reports of health claims going wrong (read about India’s health insurance conundrum at bit.ly/492XWld), cashless facilities being suspended and “new” clauses, such as the material change clause, creating confusion. Claims going wrong is almost always in the news, while the latter two have been subjects of debate recently. All of this raises questions on the relevance of buying health insurance at all. If one must run from pillar to post to arrange funds during an emergency, what’s the point of shelling out premiums for years together? If any new illness is indeed underwritten afresh (which the insurers are denying and which is in contravention with Irdai rules) under the material change clause, why buy a policy early when you have fewer or no diseases?

While insurers are crying hoarse saying the suspension of cashless claims was temporary and owing to misunderstandings, and the intention of the material change clause is not what is being perceived, you need to be prepared. How? The easier answer is to have a larger emergency corpus to meet unwarranted medical expenses. The complicated one is two-pronged. One, read the terms and conditions, however boring and lengthy, carefully to understand under what circumstances and for which diseases a cover is guaranteed and to what extent. Two, disclose all medical conditions at the time of buying, even if the distributor says otherwise; in fact, ask counter-questions to clear your doubts.

That is your task, but what about the government’s? Given that out-of-pocket expenses are more than Rs 4,70,000 crore, how much more of the burden is it willing to share? What about rising costs, often owing to the tussle between the insurers and healthcare providers. When will we see the government intervene to make costs fair and affordable? In the meanwhile, customers await reasonable solutions and total transparency (in an easy-to-understand language) on premiums, coverage and claims. Otherwise, the safety net will weaken and reduce to savings and more savings, but is it really possible to save that much for a large stratum of our society, especially given the high medical costs?