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What Is Insurance Loading?

Insurance loading or premium loading is the extra charge you must pay on top of standard premiums to get coverage for pre-existing conditions.
Last update:
31st October 2022
alea
Reviewed by a licensed advisor
man using calculator
man using calculator
Insurance loading or premium loading is the extra charge you must pay on top of standard premiums to get coverage for pre-existing conditions.
Last update: 31st October 2022
Contents

When you apply for health or life insurance, you need to fill out a medical questionnaire to declare your medical history. Underwriters use this information to determine whether the insurance company needs to impose any loadings or exclusions or decline your application based on the declaration.

If you are relatively healthy and have no pre-existing conditions that need to be covered by insurance, you will be charged standard premiums, which vary based on age and gender, whether you’re a smoker or non-smoker, and from product to product and company to company.

But what if you have a pre-existing condition that your insurer agrees to cover? In that case, you will have to pay an extra fee. This extra charge is called premium loading or insurance loading. A loading is added to your premium because your insurer has assessed that, given your pre-existing conditions, you are more likely to file a claim than others and therefore pose a greater risk to their company.

Common pre-existing conditions include asthma, chronic back pain, type 2 diabetes, endometriosis, high BMI, hyperlipidemia (high cholesterol) and hypertension (high blood pressure).

Loadings and exclusions: What’s the difference?

When it comes to pre-existing conditions, most insurance companies address them through premium loadings or exclusions.

Let’s say your insurer agrees to provide you with insurance protection for health issues other than your pre-existing condition. Here, your pre-existing condition is an exclusion, meaning you pay the standard premiums (based on your age, gender, and whether or not you smoke), but you can’t make any insurance claims related to that excluded condition.

In summary:

Insurance plan with premium loading added to cover pre-existing conditions:

  • Covers pre-existing conditions? Yes (per the terms of your policy)
  • Premium paid: Higher

Insurance plan whose exclusions include pre-existing conditions:

  • Covers pre-existing conditions? No
  • Premium paid: Standard

Premium loadings: A great reason to buy insurance when you’re young and healthy

The best time to buy insurance is when you’re young and healthy – before you discover any medical conditions. That way, you can secure long-term insurance coverage with the assurance that your policy will cover any health conditions you might acquire in the future.

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FAQ

How is loading calculated in insurance?

Loading is calculated based on the amount of risk an individual presents to the insurance company based on pre-existing conditions they might have. The more likely a person is to file an insurance claim, the higher the risk and premium loading. The premium loading can be a small percentage like 5% or more.

Why do insurance companies use loadings?

Insurance companies use loadings to mitigate the risk of taking on a customer that they perceive as likelier to file insurance claims.

What factors affect premium loadings?

Pre-existing conditions are the main factors affecting premium loadings. Common pre-existing conditions include asthma, chronic back pain, type 2 diabetes, endometriosis, high BMI, hyperlipidemia (high cholesterol) and hypertension (high blood pressure).

How do I reduce premium loadings?

You might be able to reduce premium loadings by having your pre-existing conditions excluded from your policy. Here it would be a good idea to talk to your broker or insurance agent, who can help you understand your options.

Can premium loadings be removed?

If your policy has a premium loading applied to it because of a pre-existing condition, but that condition is no longer an issue, you may be able to request to have the loading removed at renewal. Your best bet is to talk to your insurance broker or agent, who can advise you on what you need to do.

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This article was independently written by Alea and is not sponsored. It is informative only and not intended to be a substitute for professional advice and should never be relied upon for specific advice.