Smoking cigarettes is injurious to health. And to your pocket.
Buying a pack of cigarettes may not seem to be a costly action in the short run, but the price you pay for it becomes quite huge over the years. And the danger is not only restricted to just health or cost of medical treatment; smoking also affects your life insurance premium.
If you smoke, you would have to pay a higher premium than your non-smoker friend while buying a life insurance policy. Let’s understand how smoking impacts life insurance premiums, how much you pay for a cover and what you can do to reduce your burden.
It is no surprise that smokers are more prone to being diagnosed with a critical illness, and to premature death. “Tobacco use has been related to an increased risk of acquiring major health diseases such as heart disease, lung cancer and respiratory problems. As a result, insurers consider smokers to be ‘higher-risk’ individuals,” says Rishabh Garg, Head-Term Insurance, Policybazaar.com.
Insurance companies consider smokers to be more likely to claim the insurance. As a consequence, smokers are charged higher premiums than non-smokers for life insurance.
How do mostlife insurance companies define ‘smoker’?
Usually, life insurance companies use very specific questions to find out whether you are a smoker or not. “The insurance companies consider an individual as a smoker if they take nicotine in any form like bidi, cigarettes, cigars, hookahs, chew tobacco, etc,” says Pankaj Goenka, Assistant Vice-President & Head-B2B Business, InsuranceDekho.
Even if you use a nicotine patch or gum, the insurer can classify you as a smoker. To understand whether you are a smoker or not, insurers typically ask a set of questions — a) Do you consume nicotine
and/or tobacco products? b) Do you smoke? c) Have you consumed a tobacco product in the last five years? d) Have you ever consumed tobacco products? If your answer to these questions is yes, then you will most likely be considered a smoker. If your insurance company tags you as a smoker, you will be placed in the high-risk category, and your premium will be higher.
How much extra premium do smokers have to pay for term insurance?
The additional premium that you have to pay as a smoker varies from one insurance company to another. Typically, the difference in premium between smokers and non-smokers is around 30 per cent. This is because smokers are vulnerable to critical illness and have a shorter lifespan, says Goyal. However, the premium rates for smokers can be 50 per cent to 80 per cent higher than those of non-smokers, adds Garg.
For instance, a 28-year-old non-smoker male has to pay an annual premium of Rs 11,385 for a Rs 50-lakh term cover of HDFC Life Click 2 Protect Life for a tenure of 30 years. For the same policy, a 28-year-old smoker has to pay an annual premium of Rs 17,949 — 58 per cent higher.
“The extent of increase can vary considerably depending on the insurer but over 50 per cent premium increases are common,” says Kapil Mehta, Co-founder, SecureNow Insurance Broker.
Do remember that the life insurance company will check other factors as well while calculating your premium — such as type and amount of life insurance, your age and your health.
Do I have to pay more premium if I smoke occasionally?
Insurance companies generally do not differentiate between an occasional and a regular smoker. Even if you have a drag occasionally, this will still count against you when it comes to a term insurance policy. You have to declare yourself as a smoker while purchasing the policy even if you smoke only occasionally.
If you smoke a cigarette socially and are thinking of declaring yourself as a non-smoker to get a lower premium, be cautious. There can be severe consequences for lying
When you buy a term plan online, you enter a legal contract with the insurance company. You are expected to provide accurate information. Lying at the time of purchasing a policy will be considered as a breach of doctrine of good faith as the insurance company accepts all information declared by you in your insurance proposal as true. If your insurance company discovers that you have lied, it can cancel the policy during the policy period or when settling the claim. You will lose the protection as well as your hard-earned money. So it is better to tell the truth from the very beginning.
“The smoking question must be accurately answered. Some insurers ask if you currently smoke; others may want to know if you have smoked in the past. State the facts. The insurer verifies your smoking habit through a cotinine blood test,” says Mehta of SecureNow Insurance Broker.
Will I getlower premium rates ifI quit smoking after buying the policy?
No. In India, insurance companies typically do not allow you to change your term insurance status from smoking to non-smoking during the policy tenure. So it is unlikely to have any impact on your premium or policy, explains Goenka.
“Once the premium is decided and paid by the policyholders, there are fewer chances of any changes in the premium. Having said that, some insurers do provide discounts to policyholders who quit smoking. But even to get that benefit, insurers will ask the policyholder to undergo medical tests,” says Goyal of Probus Insurance Broker. However, you can quit smoking, wait for the necessary period and then buy a new term insurance policy as a non-smoker; the premiums might be lower in that case.
How long do I need to wait after quitting smoking to buy a term insurance cover as a non-smoker?
The exact period varies from one insurer to another. “But generally, the policyholder should stay away from smoking for at least 12 months to qualify for the non-smoker premium rates,” says Goyal.
But Garg points out that some insurers do not consider non-smoking status unless the customer has given up smoking for more than 12 months to up to five years.
Do I need to pay more premium ifI start smoking after buying a term policy?
If you have already purchased a term plan as a non-smoker and become a smoker later on, there will not be an impact on your policy premium. “However, it is safe to inform the insurance company, as it can delay the final payout until it verifies the claim request if such a thing is concealed from the insurer,” adds Goyal.
Source: https://economictimes.indiatimes.com/wealth/insure/life-insurance/you-can-save-80-on-your-term-life-insurance-premium-if-you-quit-smoking-when-and-how-to-buy-it/articleshow/102713832.cms?from=mdr
