Definition
Premium Loading
Loading is an extra premium an insurer charges above the standard rate to reflect higher-than-normal risk in a particular applicant.
If underwriting reveals elevated risk, such as a chronic condition, hazardous occupation, smoking or being overweight, the insurer may apply a health loading or occupation loading rather than declining cover outright. Loading is usually expressed as a percentage uplift on the base premium.
Loading lets insurers extend cover to sub-standard lives at a price that reflects their risk, broadening access while protecting the pool. Some health plans review loadings at renewal, and improvements in health (for example, quitting smoking) can sometimes reduce them.
Related terms
- UnderwritingUnderwriting is the process by which an insurer evaluates a risk, decides whether to accept it, and on what terms and premium.
- ExclusionAn exclusion is a specified condition, event or circumstance that an insurance policy does not cover.
- Standard LifeA standard life is an applicant whose risk profile is normal, allowing cover at the insurer's ordinary rates without loading or exclusions.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.