Suppose you buy a multi-year health insurance policy that fits your budget and requirements. Throughout the policy tenure, you enjoy the financial coverage and benefits at the premium rates you have initially selected.
However, at the time of renewal, you notice a hike in the premiums for the same coverage and benefits.
This increase in premiums is termed as “Loading". It is a common practice in the health insurance industry. These charges are applied for a number of reasons, mainly increased risks, frequent claims, poor lifestyle choices, etc.
In this blog, we will discuss what is loading in health insurance, factors influencing it and several other things to consider in this regard.
What is Loading in Health Insurance?
Loading in health insurance refers to the additional charges set by the insurer over the initial premiums selected by the policyholder.
There are multiple factors behind the implementation of these additional charges in a health insurance policy. These mainly include the increased risk and coverage requirements of the policyholder over time.
Let's understand the workings of loading in health insurance with an example.
Mr. Singh purchased a health insurance policy five years ago from a reputed provider. He was paying an annual premium of ₹30,000 per year to maintain the coverage. However, at the time of policy renewal during the 6th year, the premiums increased to ₹35,000 per year. This subtle increase in the premium is mainly because he has raised multiple claims during the policy year for his open heart surgery and other unforeseen medical events. This surge of ₹5,000 in the premiums at the time of renewal is termed as loading in medical insurance. |
Different Types of Loading in Health Insurance
There are two ways in which the insurance company can implement loading in health insurance.
Initial Premium Loading
This type of loading is applied at the time of buying a health insurance policy. You may receive higher premiums based on factors such as increased health risk, risky occupation, lifestyle disorders such as smoking and obesity and so on.
Simply put, you may be charged higher initial premiums because the insurance company treats you as a high-risk customer due to the above-mentioned factors. This is the reason why different individuals may receive different premiums for the same plan and coverage.
Renewal Premium Loading
This mode of loading comes into the picture at the time of policy renewal. The insurance company may think of you as a high-risk individual because you have made multiple claims during the policy tenure.
However, this practice was discontinued after the introduction of the Health Insurance Regulations of 2013. According to the law, insurers can not increase premiums for the first three years of purchasing a medical policy. The charges can only be increased after this specified lock-in period.
Factors Affecting Loading in Health Insurance
Age
Your age is a critical factor influencing the loading charges in health insurance. Senior citizens and those above 40 are likely to receive higher loading charges than young policyholders. This is because you become more prone to critical issues as you age.
Medical Condition
Your medical condition also affects loading charges in health insurance. This is because it is an indication of your deteriorating health and the possibility of making frequent claims. For this reason, higher loading charges may be imposed on your premiums to mitigate the financial risk.
Lifestyle Habits
Individuals with poor lifestyles and lifestyle disorders like smoking, drinking, obesity, etc., may face higher health insurance loading charges as they are more likely to fall prey to serious health ailments.
Pre-Existing Conditions
If you are already diagnosed with a health issue at the time of buying health insurance, the insurer is likely to categorise you as a high-risk customer. To mitigate this risk and to provide you with efficient coverage, they might levy higher health cover loading charges on your premiums.
Profession
Your insurance company can impose higher loading charges if you belong to a high-risk field of occupation such as mining, construction, aviation crew and so on. In this case, you require more financial coverage and are likely to raise claims due to unforeseen injuries, accidents and even death.
Why do Insurers Apply Loading Charges?
Health insurance companies apply loading charges to balance the premiums depending on the risk profile of the policyholder.
In other words, these extra charges compensate the insurer for the additional financial risk they are taking for individuals with a higher risk exposure.
They apply loading charges for policyholders with a higher likelihood of claiming their insurance policy.
Is Loading in Health Insurance Justified?
While loading in health insurance increases your insurance cost, it is beneficial for both you and your insurer.
For Insurers: The loading charges allows the insurance company to reduce their losses arising from frequent claims made by high-risk policyholders.
For Policyholders: On the other hand, loading charges allow policyholders to enjoy wider coverage without any limits or restrictions.
Loading Vs Exclusions in Health Insurance
Aspects |
Loading in Health Insurance |
Exclusions of Health Insurance |
Definition | Extra charges for higher medical risks. | Medical procedures and events that are excluded from coverage. |
Purpose | Helps insurers mitigate their financial losses while allowing policyholders to enjoy higher coverage. | Helps insurers to limit their financial obligations. |
Impact on Premiums | Increases premium amount. | No direct impact on policy premiums. |
Example | Higher premiums for pre-existing and chronic conditions like cancer, cardiac issues, etc. | No coverage for expenses arising from cosmetic procedures, fat-loss surgery, IVF treatments, etc. |
Things to Keep in Mind About Loading Amount in Health Insurance
Loading in health insurance not only increases your premiums but may also bring additional financial obligations. Hence, it is crucial to be aware of these charges. Below are some important considerations in this regard.
Consider buying a policy that covers pre-existing conditions without charging extra on premiums.
Select a policy that covers critical health ailments with a minimal waiting period.
Enquire about the loading charges you may have to pay beyond the initial premiums.
Ask your insurer about the reasons behind imposing loading charges.
Read the terms and conditions carefully when buying a policy. Pay special attention to the premium-related clause.
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Frequently Asked Questions (FAQs)
Will my health insurance premiums stay the same or increase every year?
As per the IRDAI's regulations, health insurance premiums can not be increased for at least three years after buying a policy. After this period, you may receive a hike in premiums due to your increased risk and coverage needs.
How are health insurance riders different from loading charges in health insurance?
Health insurance riders are the optional paid features you can buy to enhance the coverage of your existing policy. On the other hand, the loading amount in health insurance refers to the extra charges that are imposed on your premiums due to your higher medical risk.
Will my health insurance provider increase my premiums at the time of renewal?
According to the Health Insurance Regulations of 2013, health insurance providers can not increase the premiums at least for the first three years of the policy. Post that, there can be a slight increase in the premium rates due to factors like rising healthcare cost, increased risk exposure and so on.
Disclaimers:
*T&C Apply. For more details on risk factors, terms conditions, brochure, and exclusions, please read the policy wording and CIS carefully before concluding a sale.
Customer Count: This is the overall claim settlement ratio for FY 2023-24 without claim outstanding at the start of the financial year as per public disclosure of Reliance General Insurance Co. Ltd.
Premium: The premium mentioned is excluding taxes for single person aged between 5 years to 20 years with individual health policy for Sum Insured of ₹3 lakhs considering no adverse health conditions/pre-existing disease/medical conditions with waiting period of 3 years. For more details, please refer to the policy wordings. Premium used is 2,919/year converted into a month which gives us Rs.243/month (2,919/12).
Tax benefits: Tax benefits are subject to conditions under Section 80D of the Act and amendments thereof. The tax laws are subject to amendments/changes from time to time. Please consult your tax advisor for details.