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LSDefine
Simple English definitions for legal terms
loading
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A quick definition of loading:
Loading is an extra amount of money added to an insurance premium to cover the insurance company's expenses and unexpected events. It's like a fee that helps the insurance company stay in business. Premium is the money you pay to keep your insurance policy active. There are different types of premiums, like advance premium, earned premium, and net premium. Premium rate is the cost per unit of life insurance, usually expressed as a cost per thousands of dollars of coverage.
A more thorough explanation:
Definition: In insurance, loading refers to an additional amount added to the premium to cover the insurer's business expenses and contingencies. It is also known as expense loading. The loading is included in the gross premium, which is the net premium plus expenses, less the interest factor.
Example: If the total premium for a one-year insurance policy is $1,500, and the net premium is $1,200, the loading is $300. This amount covers the insurer's expenses and contingencies.
The loading is necessary for the insurer to cover their costs and make a profit. However, it can increase the cost of the premium for the policyholder.