Life Insurance Exclusions and Loadings Explained

Insurance companies will, in some cases, place a loading or an exclusion on a policy if there is an increased risk due to medical history, a dangerous job or past time.

Increases in insurance premiums due to medical history are not uncommon when it comes to life insurance. Usually the minimum loadings that an insurance company will place on an application is +50%. This means that if the monthly premium was $100.00 a loading of +50% would bring the total monthly premium to $150.00. Loadings go up in +25% blocks after +50% for example; +75%, +100% and so on.  The size of the loading depends on the risk that is associated with the cover.

The life insured may have an exclusion placed on their policy if they participate in a hazardous past time such as skydiving, motor racing or contact sports. In many cases insurance companies will place exclusions on these activities.

An exclusion means that no claim can be made as a result of participating in the excluded activity. For example; if the life insured had a sky diving exclusion, they would not be able to make a claim if they passed away while participating in this.

In some cases the insurance company can offer the life insured a choice between a loading and an exclusion on a hazardous activity.

A lot of details are taken into consideration when an individual discloses that they participate in a hazardous activity such as; how often to they participate and at what level? Is it amateur or professional? In most cases the applicant will disclose all of these details in a statement as part of the application.

Loadings and exclusions can often be reviewed if the life insured’s situation changes.  For example; if the life insured had a +50% loading due to a raised cholesterol, the insurance company would be able to consider a review if the life insured got the raised cholesterol under control and maintained normal cholesterol levels for a period of time that is in line with the insurance company’s guidelines.

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