What is Loading in Health Insurance Policy? Find Out Here

Healthcare costs have been rising steadily and having the right health insurance policy is not a luxury but a necessity now. The premium for health insurance, however, depends upon a lot of factors with Loading in health insurance being one of them.

Imagine you have decided to buy a health insurance policy and asked your friend for advice. They suggest to you the policy they are using themself along with the premium amount being charged. Since both of you are the same age, you will be under the impression that your premium will also be the same as your friend’s. However, when you apply for the policy, you discover that the premium you are asked to pay is much higher than your friend’s premium amount for a similar policy. You would then wonder about the possible reasons for the difference in the premium amount.

The distinguishing factor here is the Loading charges. We will now discuss the major reasons for this difference.

Understanding Loading Charges in Health Insurance Premium

Loading in insurance can be understood as a way to cover a higher risk. When a health insurer offers coverage to a customer, certain risks could be higher for some customers compared to others. 

These risks relate to the customer’s age, medical history, lifestyle choices like drinking and smoking, occupation, etc. An underwriter takes into account all these factors while calculating the premium amount. This can lead to an increase in premiums for certain customers’ health insurance plans.

Loading is generally applied in two ways, Initial premium loading and Renewal premium loading.  Let’s understand these two terms in detail.

What is Initial Premium Loading in Insurance?

When one applies for a health insurance plan, the insurer takes into account various aspects to decide the initial premium.  This includes things like age, lifestyle habits like smoking and drinking, medical history, and even the job the customer is working in.

All these factors are the risks associated with the insurance and are considered by the underwriter to decide on the initial premium amount. This is what is referred to as Initial premium loading. A higher premium is charged to cover the risks associated with providing insurance coverage to new customers.

What is Renewal Premium Loading in Insurance?

Renewal premium loading refers to the higher premium that a customer needs to pay at the time of renewal.  The higher premium could be charged as a result of the claim made in the health insurance policy or because of other reasons. Examples include old age or the severe risks associated with the customer’s health.

The regulatory authority, though, has brought in a new rule that prevents the insurer from changing the customer’s premium for the first three years. Most insurers, however, have now discontinued this practice and the premium hardly changes for the customers.

Now that we have got a fair idea about what loading is and how it affects your health insurance premium, let’s look at some of the causes which lead to higher loading.

Factors Which Affect Loading in Health Insurance Premium

Health insurance companies assess the premium amount to be charged to the customer based on a variety of factors. These factors affect loading and consequently the premium amount that the customer needs to pay. This includes;

1. Age –

People around the world become more prone to higher illness as they grow older.  The risks associated with providing health insurance coverage to an older customer are thus higher than to a younger one. The stressful life that we live with minimal focus on our health also takes its toll on our bodies.  A large number of people have now begun to develop serious health issues as they reach their forties. This leads to a higher chance of a health insurance claim.  To offset this risk of higher claims, many insurers may put in higher loading charges for older customers.

2. Lifestyle Factors –

How we live our life affects the kind of illnesses we may be exposed to.  A person who drinks and smokes regularly has a higher chance of developing lifestyle diseases.  The increased risk of illness reflects in the premium amount that is charged towards the health insurance coverage plan of such customers.

3. Gender –

Certain issues are specific to a particular gender and affect the loading charges for such customers. 

4. Health and Medical History –

The health and medical history of an individual also affects the premium on the health insurance plan.  A person with pre-existing illnesses has a higher chance of making a claim. If an individual is already suffering from sickness like diabetes, hypertension, obesity, asthma, etc., the chances of a higher premium to offset this higher risk will lead to increased loading.

5. Type of Plan and Benefits –

There are multiple health insurance plans available to choose from for the customer.  A plan which provides wider and more comprehensive coverage and includes existing illnesses etc. will have a higher loading charge than a normal health insurance plan.  It will, however, provide a bigger safety net to the insured.

6. Occupation –

The type of job or work one is engaged in can also lead to higher health risks for an individual.  Someone engaged in hazardous work is exposed to higher risk.  Such customers may be required to pay a higher loading charge to minimise the risk of higher claims.

Thus, Loading is one of the ways to mitigate the higher risk associated with certain conditions.  By ensuring a healthy lifestyle, you can also get benefits in terms of reduced premiums for a health insurance plan.

There are multiple health insurance plans available in the market to choose from.  However, it is important to research thoroughly and select the one best suited to your needs. You should read the policy documents carefully to understand the various charges. You can also seek clarification from your insurer in case of any doubt.

It is a great idea to go through the website of trusted insurers or seek guidance from experts.  This will help you in discovering the most important thing you would want from your health insurance plan and choose the specific plan as per your need.

Aditya Birla Health Insurance (ABHI) takes into account all these specific needs of yours to offer the best health insurance plan. ABHI believes in “health insurance that cares beyond financial protection” and is present in over 2300 cities across India.  With thoroughly researched products and customer-oriented services, ABHI is one of the leading and most trusted health insurance providers in the country.  It also rewards you for your healthy lifestyle choices when you buy a health insurance plan.

Below are some of the popular health insurance plans from Aditya Birla Health Insurance.  You can click on the link below to get more information about them while choosing the best coverage for you.

1. Activ Assure Diamond - https://www.adityabirlacapital.com/healthinsurance/activ-assure-diamond

2. Super Health Top-Up - https://www.adityabirlacapital.com/healthinsurance/super-health-topup

3. Active Health Enhanced  Insurance - https://www.adityabirlacapital.com/healthinsurance/active-health-enhanced-insurance

4. Activ Fit - https://www.adityabirlacapital.com/healthinsurance/activ-fit