Loading in Health Insurance

Here's a question for you all: what's the purpose of a health insurance plan? Protecting you against financial crises arising from health conditions, right? But that's not the only thing you need to know while buying health insurance. There are multiple aspects to health insurance, and it is imperative that you know them. In this article, let's explore ‘loading’ in health insurance.

Important Update (Dated May 30, 2024) – Good news for Health Insurance policyholders! According to the Master Circular on Health Insurance Business 29052024 rolled out on May 29, 2024 by IRDAI, insurers are to decide on the request for cashless claims within 1 hour of receiving the request. Also, the final claim is to be granted within 3 hours after the policyholder’s discharge from the hospital. Insurers have been directed by IRDAI to establish necessary systems and procedures for this process by July 31, 2024. The Master Circular on Health Insurance Business 29052024 circular is available here - https://irdai.gov.in/document-detail?documentId=4942918

Loading is the additional amount added to the premium amount of certain risky policyholders. Here, the term 'risky' means people with a poor medical history, habits, or a hazardous occupation. These policyholders are at a higher risk of contracting health issues and diseases. To put it simply, they are most likely to raise a health insurance claim during the policy tenure. Insurance companies make use of loading to cover the increased risk of losses.

As mentioned above, loading charges are a way of compensating for the risks an individual brings due to their poor lifestyle, medical history, or occupation. Let's understand how this concept works with an example:

 

Lavi, a 51-year-old woman, has been paying ₹5,650 as a premium for the past 15 years. She raised a claim after undergoing laparoscopic surgery in 2021. Now, since she started facing health issues that require close medical attention, she has become a risky policyholder to the insurance company. Hence, her premium at the time of renewal is higher than the aforesaid price. So, the excess price can be termed as loading charges here.

The example mentioned above shows how the health insurance premium rate can be affected for high-risk individuals. However, this increase in premiums can vary from person to person. So, let's say you and your friend are buying your health insurance plan. You have a history of smoking, whereas, your friend has a pre-existing disease. You both are risky individuals for the insurance company. However, the premium amounts for you and your friend are most likely to differ.

Here are a few important factors that could affect the loading amount:

• Age

Age plays a major role in determining your premium and loading amounts. Hence, financial experts recommend you to buy health insurance at a younger age. The premium and loading amount for a 25-year-old individual will be cheaper compared to a 55-year-old person.

• Medical State

The premium and loading amount for an individual depends on their medical condition. Conditions like diabetes, hypertension, cholesterol, etc., make way for chronic diseases. Thus, if you have diabetes, your premium would be higher. However, you must note that the loading price can be reviewed once you bring your sugar levels under control.

• Pre-Existing Diseases

If you are suffering from a pre-existing disease like diabetes, asthma, hypertension, etc., your insurer will charge a higher premium. Someone who already has a medical condition would make more health insurance claims. Hence, their premium includes a loading amount.

• Lifestyle Habits

Your lifestyle can have a significant impact on your health insurance premium. If you smoke and drink regularly, you are at a higher risk of contracting serious diseases like cancer. Hence, health insurers charge an additional amount from people who follow a poor lifestyle.

Along with the aforementioned points explained in brief, there are multiple other factors that have an impact on your mortality and loading, they are:

• Occupation

• Family medical history

• Place of residence

• Obesity

Loading is a rate every high-risk policyholder pays to receive health insurance coverage. However, instead of charging an extra amount from the insured, some insurance companies utilise the concept of exclusions. Exclusions allow you to continue the same premium (without the loading charges), however with a set of certain conditions. Common exclusions include cancer, maternity, injuries caused by adventure sports, etc.

Most financial experts believe that loading keeps both the insurer and policyholder secure. Insurers receive added security against losses incurred due to individuals with anticipated risks. On the other hand, it allows policyholders to avail comprehensive coverage despite the high-risk factor. Moreover, let’s say an insurance company charges the same amount from a high-risk individual as well as a low-risk person. Wouldn’t it be unfair towards the low-risk person? Why should they pay the same amount even though they pose no risk?

That’s all you need to know about loading in health insurance. It is an important cost charged against people who are at a higher risk of contracting a disease and making a claim. So, if you are prone to fall severely ill due to pre-existing conditions, obesity, or poor lifestyle, you might have to pay an additional amount. At Bajaj Markets, we have a range of health insurance plans that offer comprehensive coverage at a feasible premium. So, head over to our ‘health insurance’ page and get yourself covered now!