Loading is the amount the critical illness insurance companies charges at the time of policy renewal if you claimed in the previous policy tenure. There are various ways in which loading is computed by insurance companies offering critical illness insurance policies.
Some of them are –
Loading with respect to claim –
It means, for every claim you make, you would have to pay more premium for the next year. In case, you don’t claim in the next year, the hike in premium rates will go away. Or again it will increase every year when you make a claim. Almost every insurer has defined a maximum limit for loading.
Loading as per your age –
Most critical illness insurance companies have a loading clause on the age of the policyholder. As per the age of the policyholder, a premium amount is charged.
Loading with respect to your current health –
If you are obese or smoke regularly, you would have to pay high loading charges as compared to the one who is healthy and non-smoker.
Obesity, smoking, alcohol, etc.; make you susceptible to health ailments and there is a high probability of your
organs, like the heart, brain, etc.; causing injury. It also increases the chances of filing a claim. In this situation, whatever the extra premium you would have to pay, it would be medical loading or simply loading.
In many cases, the increase in the premium rates makes it tough for many policyholders to continue with their critical illness insurance policy. To ensure that you don’t get such a rude shock at the time of policy renewal, have a clear understanding of loading. You can also ask your broker about loading before you purchase critical illness insurance. Further, you should choose an insurer that offers fixed or zero loading charges.
However, if you look deeper, loading is a concept that protects both the insurance company and the customer. While the insurer can safeguard itself from higher claims from risk-prone customers, loading ensures that even people with a slightly high-risk factor get critical illness insurance cover. Also, if two policyholders have the same insurance cover at the same premium rates, even when one person is more vulnerable to health risks than the other, it would be unfair for a person with low risk as he would be paying the higher premium rate.
It is necessary to note that the loading policy differs from one insurer to another. It is because every insurance company has its own underwriting guidelines. Another important thing to note here is that it is possible to review the loading clause as per the change in a person’s situation. For instance, if applied loading to a candidate because of high blood pressure, the insurance company can revise the premium rates if the individual brings blood pressure to an optimum level.
Neeraj suffered a cardiac arrest last year and had to undergo an emergency bypass surgery. Fortunately, the surgery was successful, discharged after 20 days. Thankfully, Suraj had purchased a critical illness insurance policy for himself. As soon as he was hospitalized due to a heart attack, his family informed the critical illness insurance company and paid a lump-sum amount to deal with the medical expenses.
The critical illness insurance took care of medical expenses incurred on the treatment of Neeraj and also paid an amount that helped in dealing with the loss of income.
Neeraj was thankful that he had purchased a critical illness insurance policy. But nothing prepared him for the jolt which he got after five months when he got a policy renewal notice from his critical illness insurance company. He found that the premium of his critical illness insurance had increased from Rs 20,000 to Rs 30,000.
He immediately contacted his insurer who informed him that the premium hike was due to loading.
Here the insurer applied the ‘claim loading. As Neeraj claimed in the previous year, the insurer increased renewal premium rates.