Loading in Health Insurance

Health insurance plan premiums are calculated based on many factors, including age and medical history. The concept of premium loading refers to the additional cost a policyholder has to bear over their base premiums due to increasing age or added risk factors.

This concept acknowledges that higher risk factors in certain people require higher coverage, resulting in higher premiums. It is a pragmatic approach applied by health insurance companies in order to provide high coverage and manage risk. The practice of premium loading in health insurance ensures that the coverage is adequate and the policy remains viable.

Often, being unaware of this concept leads to confusion and adds to the shock value. Thus, to steer clear of unnecessary panic and confusion, it would be beneficial to understand the factors that contribute to the premium loading and prepare for the premium in anticipation.

Understanding Premium Loading With the Help of an Example

• To understand the concept better, let us look at this hypothetical situation:

• Assume that Ramesh and Suresh bought their health insurance at the same time. However, the premium cost for both of them is different. Both wonder why. There are factors like age and health conditions that cannot be overlooked. In this situation, Ramesh was much older than Suresh and, therefore, more susceptible to certain age-related health risks. The higher the risk, the higher the premium.

Many factors contribute to the increase in premium chargers. Here are a few of them:

Age: Other than factors like policy tenure, type of plan, and amount, age is the main factor that decides your premium charges. This is because as you age, you are prone to certain age-related health conditions or diseases that may put you at a higher risk than ordinary circumstances. In this case, the insurer will add loading to the premium after a certain period of time.

Smoking: Other than age, consuming or smoking tobacco or nicotine is the most common and main factor that impacts the loading charges applied to premiums. Life insurance and health insurance premium for a non-smoker and a smoker has a significant difference, the amount being almost double for the former. This is because smokers are highly likely to suffer from health complications due to exposure to nicotine and live a shorter lifespan.

Medical History: Before you get a medical policy, your insurer will take a detailed medical history. The same is considered when the insurer is deciding the loading charge.

Taking a detailed medical history helps the insurer to know which type of genetic diseases run in the family and are potential risks. While gauging the medical history, the insurer also looks for past hospitalisations and the number of hospitalisations required for you to claim your insurance.

Obesity: Obesity adds to the risk of suffering from certain lifestyle diseases. Therefore, insurance companies consider them to be at a greater risk of suffering from illnesses like hypertension, diabetes, etc. In such cases, the chances of requiring a higher coverage increase. Therefore, insurers consider loading the premium amount.

Location: The place where you reside also contributes to loading in insurance. If a person resides at a place where there is political unrest, is hazardous, or lacks healthy food options, it is going to increase the risk of lifestyle illnesses. Thus, insurers take into account your location and add residential loading accordingly.

Occupation: Place of occupation adds risks in certain professions. If you are exposed to hazardous environments or potential infectants at the workplace, chances of suffering related health issues increase. The premium loading rates, in this case, will be higher.

Gender: Certain health conditions are more prevalent in one particular gender and their lifestyle. Thus, premium rates in both cases will be different and will depend on the gender of the policyholder.

Even though premium loading in health insurance causes a spike in the premium amount, it significantly changed and benefited policyholders. It might seem like a burden, but when looked at from a wider perspective, these are the benefits of loading for policyholders:

• People with known and pre-existing ailments can benefit from the security of health insurance plans. Before this, there were high chances of rejection for such cases.

• It reduces the chances of invalidity of policies at the time of claiming the insured amount.

• You are subject to comprehensive coverage for all the illnesses you test positive for.

There are two ways in which a health insurance company can apply loading:

Higher Renewal Premium: If a policyholder develops an illness after buying a policy, the insurance company will treat them as a high-risk customer. In this case, the insurer will justify premium loading to accommodate the expenses under the illness.

Higher Initial Premium: This type of loading is adjusted at the time of purchasing a health insurance policy based on factors like age, gender, lifestyle, pre-existing ailments, etc.

The concept often leaves policyholders wondering what is claim loading in health insurance and is it justified. And even though there are advantages and disadvantages to this, the whole objective of this approach is to have fair premium rates for high-risk and no-risk policyholders. Most insurance companies do not provide coverage to people above 65 years of age as they are at a higher risk of developing critical illnesses.

The concept is designed to benefit both the insurers as well as the insured. The insurance company can reduce their losses from claims arising from high-risk customers. At the same time, the insured can have wider access to treatment facilities and higher coverage for themselves and their loved ones.

However, it is unjustifiable if the insurer adds to the premium rate due to cases where there are no chances of future complications, such as cataracts.

Even when other things are justified for the imposition of loading charges, a policyholder must be aware of other loading charge conditions in advance:

• Choose a policy that covers pre-existing ailments without the additional charges.

• Go for a policy that provides cover against critical illnesses with a minimum waiting period.

• Verify the percentage of the loading amount you will have to pay after the premium.

• Ask the insurer about increasing the premium amount with age or time on renewal.

• Ask the insurer if you will have to pay higher loading premiums if you decide to port your health policy to another provider.

It is crucial for a policyholder to be aware of the concept of loading in health insurance while buying a health insurance policy. Loading adds to the existing premium when either of the factors comes into play, such as age, critical illnesses, change in lifestyle, etc. To avoid confusion and panic while observing a sudden increase in the premium amount, it is important to be aware of the conditions of loading.

So, make sure you verify all the necessary information and read all medical insurance policy terms before choosing health insurance for you and your family.

To avail maximum coverage of critical illnesses, choose from a wide range of comprehensive plans from Tata AIG.

With our round-the-clock assistance, nationwide cashless hospitalisation, and bonus for claim-free years, you can be assured of your and your loved ones’ health protection. Additionally, you can check our pre-existing disease cover in health insurance to enhance your existing health insurance policy.