Everyone has a right to buy insurance in India and insurance companies are in the market to provide you life coverage. However, they are also in the business to earn profits and to protect that; they treat each and every customer on a different parameter. If you’re not in excellent health and are considered to be too risky for the insurance company it may even deny giving you the policy. But it can’t keep denying every other person purely based on risk. Therefore, they bring in something called loading in insurance policies when it comes to calculating the premium.
The people, who are considered risky that means with whom the company has a higher risk of paying out death benefits are charged a higher premium compared to low-risk category customers. In simple words, loading in insurance policies is an additional cost that is part of the insurance policy premium that seeks to cover the higher anticipated losses, which an insurance company assumes to incur by ensuring a risky customer.
Now, loading is based on certain basic parameters of an insured’s profile. Have a look:
1. Pre-existing Diseases
If you’re suffering from some pre-existing ailments that can result in higher medical costs or death benefits during the policy term, you’ll be considered a risky customer. The insurer will charge loading to the premium, and the percentage of loading will vary from company to company as per their underwriting guidelines.
2. Genetic History
You might be perfectly hale and hearty, but you might be genetically prone to certain diseases like cardiac disorders or certain types of cancer. This will also make an insurance company to add extra premium to your base premium as loading in your policy.
As you grow older, mortality charges and the probability of you dying also aggravates and to lessen their risk; the insurance provider will add loading to your policy which means covering you for the specified tenure at an additional cost considering high-risk factor in your life.
Some people are employed in dangerous professions like working in a coal mine or the armed forces or being a journalist or a business traveler, where you have to to the countries which are considered risky. Even if there is no danger to you due to your health condition, professional requirements might keep you in the extremely risky category thereby affecting the premium calculations for the premium.
If you’re living a sedentary lifestyle, eating junk food, no exercise, smoking, etc., then the probability of you falling sick due to obesity or getting life-threatening diseases like cardiac disorders, diabetes, and the likes increases manifolds. Also, if you love adventure sports, love to go on trekking or indulge in dangerous activities, you will be a part of high-risk customers. This lifestyle, then becomes a prominent factor while calculating premiums.
Do understand this factor and look for the loading clause in the terms and conditions of the plan you’re going to buy. It is advisable to compare policies with other insurers as well before finalizing any one.