What are life insurance exclusion, indexing and loadings?

Last updated on November 25th, 2021 at 02:59 pm by Bill Tsouvalas

Getting the most out of your life insurance policy also means understanding the terms and features that come with it. If terms such as exclusions, premium loading, and indexing leave you scratching your head wondering how this will affect you, this helpful guide breaks down how each term will affect your policy.


When taking out a life insurance policy to protect you and your loved ones an insurer will assess you on an individual basis to ensure that you get a policy that adequately covers you. Your premiums are also calculated on the amount of risk that you pose. High-risk individuals are usually charged a higher premium.

However, all life insurance policies come with exclusions which are high-risk conditions, cases, and activities that you will not be able to make a claim on. What this means is that should you sustain an injury, illness, or pass on due to these exclusions, your insurer will not cover you for when the payout is made.

Exclusions are usually outlined in your policy’s Product Disclosure Statements (PDS) which will state how these exclusions can affect your policy. Some of the general exclusions that come with life insurance policies are:

  • Self-inflicting harm such as suicide that occurs 12- 13 months after taking out your policy, but you can be covered if this occurs outside of this time frame
  • Injury, illness, or death sustained through participating in a criminal or illegal activity
  • Hazardous activity such as acting participating in a dangerous activity such as extreme sports, driving recklessly, not seeking medical treatment for extreme and obvious health issues and ailments
  • Travelling to high-risk areas that have been declared a ‘no go’ area by the government
  • Depending on the life insurance policy that you take out there may be some high-risk occupations that they may not cover.

Premium loadings

This is a loading fee that is a percentage that is applied to individuals that have a higher likelihood of making a claim in the future. What this means is that the loading is added to individuals who have higher-risk lifestyles. This is also applicable to people who are not able to get access to standard life insurance rates due to a pre-existing medical condition, high-risk lifestyle, or the type of occupation that they have. Some of the reasons that you may attract a loading fee is:

  • Unhealthy lifestyle choices such as heavy drinking and smoking which can impact your health
  • pre-existing medical conditions that you may have had in the past, current, or a re-occurring condition can attract a loading fee. Some conditions will not be covered at all, but this will have to be checked with your insurer.
  • If you have a risky occupation or participate in a risky hobby that can put your life at risk.


This is a standard feature that comes with most insurance policies to make sure that the sum you have insured for keeps up with the inflation rate so that you are adequately covered when your policy is paid out. Some policies will automatically include this fee with your policy fee, but others may put this as an extra cost. Checking your policies features and fees that come with it will help you know whether it is suitable for you. Indexing works by using the Consumer Price Index (CPI) or the inflation rate to protect the value of money in your policy.