Skip to main content

What is loading factor in insurance and its affect on your premium?

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

Load factor in insurance

Amit Sharma had taken a mediclaim policy a few years ago from an insurance company of repute and he also seemed very much satisfied with that policy till sometime back. The reason being that the insurance company had readily honoured his claim for medical expenses, which he had incurred last year for undergoing a sudden heart surgery. However, Sharma got the shock of his life when he tried to renew his policy in July this year as his premium had gone up substantially. When he inquired further, he was told that was because of something called 'loading'.

Now loading was something which he had never heard in his life. Like Sharma, many of us are not aware of the presence and purpose of 'loading' in insurance and its affect on policy premiums. So, what is loading after all, one may ask? According to insurers, loading is an additional cost built into the insurance policy to cover losses which are higher than anticipated for the company arising from insuring a person who is prone to a form of risk.

Loading as a concept, thus, comes into play when an insurance company is dealing with a high-risk candidate, and is resorted to by insurance companies in cases where the risk to the individual is higher than in ordinary circumstances. This can be due to medical history, a dangerous job, or a hazardous pastime.

Various Types of Loading and Factors Which Affect Premium

Loading primarily occurs in life as well as health insurance plans. In general insurance there is usually underwriting-based loading and claim-based loading. However, after the introduction of Health Insurance Regulations 2013, claim-based loading has been removed from all health policies.

The waiver on claims loading is a major benefit now as insurers cannot charge higher premium based on an adverse claim history in the previous policy year.

Another benefit to the policyholders is that premium can't be changed for at least 3 years, which will bring in consistency in pricing and policyholders need not worry about its increase at least for the initial 3 years.

This means that Mr Sharma's premium possibly wouldn't have increased because of the loading factor had he renewed his policy after 1st October this year.


In life insurance, the amount of your premium usually depends on the amount and term of your insurance and the type of policy you want. However, the main factor that determines the premium is your age.

That is because as age increases, the probability of mortality increases and hence the premium for a 50-year-old person will be significantly higher than that for a 25-year-old person.

Citing an example, he says that in a group if all applicants are absolutely healthy and all are 45-year old, the probability of mortality for all will be the same and hence the premium will be the same for all the persons in the above group. If, however, one of them is obese, then there is a higher probability of damage to the end organs, like brain, heart and kidney, in this person and hence his longevity will be adversely affected. Here the premium charged to this person will have to be higher than the rest, to be equitable to all. This extra premium collected from the adverse life is called loading - medical loading to be precise.

In some advanced markets gender is also considered for pricing. For instance, female lives in the reproductive age groups are considered favorable for insurance due to lesser probability of morbidity and mortality.

Some other factors which may affect the mortality and morbidity include:

> Smoking/contact with tobacco or nicotine in any form

> Various medical conditions in the proposed insured as well as in the family

 > Occupation

> Place of residence

For instance, premiums for smokers can be as much as double the cost for non-smokers due to an increased risk of smokers dying younger.

Also, people living in some countries where political unrest is common or probable have to face residential loading. Occupational and residential loading is usually in the form of a fixed rupee value on per thousand sum assured that the customer buys, whereas the medical rating is an extra premium as a percentage of the basic premium that the applicant pays.

The whole idea of adding a loading, be it medical, occupational or residential, is that life insurance will work only if the premium charged to each individual is equitable and proportionate to the risk that the life brings to the insurer.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief ‘96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now