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A health insurance is there to protect you against financial losses when it comes to health conditions or medical emergencies due to disease, illness or even an accident. However, it is important to remember that it comes with some important terms and conditions. One of these is loading.

In health insurance, loading is an additional amount added to the premium for certain “risky individuals”. Risks can be due to a person’s medical history, habits, or a hazardous occupation.

These are people who are at a higher risk for certain health issues or illnesses, and thus to higher risks and losses for that period. Insurers use loading as a way to cover these increased risks and potential losses with such individuals.

As we have seen, loading charges come into play in health insurance when dealing with individuals who may be at a higher health risk due to certain factors. For these people, the insurance company will ask a higher premium to cover any extra losses that might arise due to their risks.

Example 1: Let us say you and your friend purchase the exact same health insurance policy, but your friend is 5 years older than you. In this case, you will find that, even though the policies are the same, the premium amounts will be different. Your friend's insurance will be higher than yours. This is because the older a person gets, the higher the loading will be, as they are at risk of more illnesses and medical conditions.

Example 2: Say your father always pays his premium on time, but one day he has to undergo some medical procedure. This is covered by his insurance policy, and he is initially happy that his claim was covered swiftly. But, at the time of renewal, he is surprised to see that his premium has increased. In this case, the extra amount is charged by the insurance provider to cover a risky individual.

These examples above, loading makes insurance rates higher for a high-risk individual. This leads to an increase in the premium amount.

However, this increase will be different for different individuals, as loading is determined based on a number of factors. These will determine how much a person’s premium is increased based on the medical risks.

Here are some of the major factors that might affect the amount of loading applied to your policy:

1. Age

One of the things taken into consideration when determining premiums and loading in health insurance, is the age of the person. This is because as one ages, the chances of mortality, hospitalization, and medical expenses towards ailments and illnesses are more likely to increase. So, the premium for a 50-year-old person will be significantly higher than that for a 25-year-old person.

For example, while a 25-year-old person might have to pay a premium of ₹2,414/year for a sum insured of 3 lakhs for a health insurance, one who is 50 might have to pay ₹6,208/year to get the same sum.

Additionally, most insurance companies also have an age ceiling for individuals buying a new health insurance policy. This generally varies from 65-80 years, as the older one gets, it is more difficult to determine their risk factors and estimate of health-related expenses.

2. . Medical State

Another factor that is important in loading is the medical state of an individual. This could be when someone has a recent history of surgeries, serious illness, or other medical issues, for example a raised sugar level. In this case, loading might be applied upon renewal.

However, it is important to note that in such instances, the loading can also be reviewed when the person’s situation changes (such as when the individual lowers their sugar levels).

3. Pre-Existing Medical Conditions

When a person is suffering from a pre-existing medical condition such as diabetes, high blood pressure, or asthma, they will likely have to pay a higher premium compared to healthy people of the same age group.

This is usually because when someone has a pre-existing condition, it can result in more claims for hospital expenses as well as higher medical bills. Thus, insurance companies might see them as a higher risk and consider loading their health insurance premium.

4. Smoking Habits

One factor that has a major impact on loading of health insurance premiums is tobacco or nicotine use. Whether this is smoking or chewing tobacco, there is a higher risk in covering a person, as chances of lung infections, cancer and other critical illnesses will increase drastically.

In fact, health insurance premiums for smokers can be almost double those for non-smokers. While a 25-year-old non-smoker might have to pay ₹5,577/year for a sum of ₹1 crore, a 25-year-old smoker would pay around ₹9,270/year for the same amount.

Some other factors that may affect loading are:

• Occupation – If your job includes work that is hazardous to your health, the insurer might end up offering you a higher premium on health insurance.
• Place of residence – In case the area you live in has higher incidences of climate issues or unrest, you might have to face residential loading.
• Obesity – Insurance companies consider overweight individuals (based on BMI) more prone to illnesses such as diabetes, hypertension, etc. Since this might lead to higher claims, they will consider loading the health insurance premium.
• Medical history of your family – If your direct family members (like parents or grandparents) have a history of illnesses like cancer, heart disease, Alzheimer's, etc., you will likely be at a higher risk for these illnesses, and thus insurers will consider a higher premium.

As we have seen, insurers usually use loading when they feel that there is a higher than usual risk of someone making a claim.

However, instead of loading, some insurance companies use the concept of exclusions. Exclusions are when a person can continue paying the same premium (without and loading), but subject to certain conditions or exclusions.

For example, your insurance policy might exclude cancer-related expenses or treatments, or maternity related expenses, or injuries related to adventure sports. Then, you will not be able to make a claim for these situations.

These days, many insurance companies will offer you a choice between loading or exclusion. This will mean that you will still receive more comprehensive coverage, but at an additional cost.

Most insurers and financial experts believe that loading is justified in many cases to protect both the insurer and the customer.

For insurers, it provides more security against losses for individuals who may be at a higher than anticipated risk of making medical claims. And, from a customer point of view, it allows such people with a higher risk factor to get a more comprehensive insurance cover.

This includes those above the age of 65-80 years, as well as those suffering from major ailments like hypertension or diabetes, history of major surgery, adverse family history, or with bad habits such as smoking. Thus, by taking all these factors into account while calculating a person’s premium, insurance companies make it easier for those customers who are less prone to risk.

For example, let us look at two people who have the same insurance coverage, but one of them has a higher health risk. Without loading, they would both pay the same premium, which would be unfair to the low-risk individual who would end up paying more.

However, there are also cases where loading is not justified, such as when it is applied to individuals after a procedure that is easily treatable and with a low risk of further complications. For instance, individuals with a history of surgeries like cataract or hernia.