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How Smoking Affects your Term Insurance Premium

By PolicyBazaar
  | Published: 12 April 2021

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While one never knows when life puts them face to face with an accident, it is always a good idea to be prepared for one. Hence, one of the top financial advice for every individual and their families includes safeguarding their finances as well as their future by buying a dependable term insurance policy. A term plan as opposed to the more traditional life insurance policies, doesn’t come with the challenge of having high premiums and are therefore fairly budget- friendly. So, whenever there’s a dilemma regarding which insurance plan to pick, term insurance emerges as a clear winner since it offers essentially the same benefits and coverage as a conventional life insurance plan. They however have a significant advantage over the others due to their low cost, making them an economical option for a lot of people.

There are instances however when even a term insurance policy can cost a lot. This happens when an individual tends to pose a high risk to the insurance provider, making them a liability and thus pushing the premium rate higher for the policy buyer’s term insurance. Lifestyle habits like smoking can impact an individual’s health directly, thus impacting his or her insurance premium at the same time. 

Tobacco use is accompanied by several health risks and can thus influence the cost of term insurance premium too. This is due to statistics depicting that smokers are far more likely to file a claim due to a critical illness caused by smoking or because of premature death. Henceforth, smoking not only poses a risk to your health but also to your wealth!

Who is classified as a smoker in the insurance world ?

In the insurance sector, an individual will be defined as a smoker if he or she has smoked tobacco in the past 12 months before filing an application for approval. It does not matter whether the person is a chain smoker puffing 20 cigarettes a day or whether they smoke occasionally. All smokers are treated the same way before an insurance provider. This is due to the fact that an underwriter does not take how much one smokes into consideration before computing the cost of their term insurance premium for an insurance plan.

The impact of smoking on term insurance premium:

Medical research has proven that smoking for a long time can lead to developing life-threatening conditions like various types of lung and mouth cancers, cardiovascular diseases, respiratory diseases, and even lead up to a stroke. Furthermore, as per the reports released by the World Health Organisation (WHO), unhealthy smoking patterns have resulted in the demise of over 50 percent of those who indulge in this activity.

Given the presence of such scientific evidence, insurance providers generally charge much higher term insurance premium from smokers as opposed to their non-smoker counterparts. Even though the premium rates are high, they are still pretty reasonable compared to any other insurance plan available in the market. However, it is still advised to reevaluate one’s smoking habit in order to amplify the benefits received from your term insurance plan.

In some cases, the frequency of your smoking habit can influence the cost of term insurance also. If someone has decided to quit smoking and they inform their insurance provider of the same, it is possible to avail some considerations in the light of their resolve. It is even possible that the insurance company might even reconsider policy a few years down the line, thus revising your term insurance premium cost after you have quit smoking completely.

Non-smokers do get the most lucrative premium rates along with the best benefits from their term plan. However, even if one does find oneself trapped with this addiction, it is still possible to make the most of your policy by buying the right plan from a reputable insurance provider.

Not disclosing your smoking habit to your insurer:

As we have discussed above, the rates of premium for smokers are much higher than they are for the non- smokers and this might offer to be a source of temptation for some people, compelling them to not disclose the truth about their habit so as to ensure that their premium costs are low.

Do not underestimate the ability of an insurer to unearth the truth. They are in the business of fully investigating an individual, their finances, their credit history, their medical history as well as their past patterns. Therefore, every insurer does their part of the investigation to fully ascertain the applicant’s medical history which might indicate their tobacco usage. If you are lucky and still remain undetected as a smoker but you eventually suffer from some critical illness like cancer, your medical records would indicate whether you are or were a smoker along with any other lie you might have supplied to your insurance provider.

In the event of the insurer discovering a lie or any fraudulent claim, they have every right to reject your claim. Lying will therefore cost you when you need the insurance money the most. It can even cause your term insurance policy to lapse, leaving you without any coverage.

If the insurer discovers about the lie regarding smoking during a claim:

Generally in such instances, the insurance providers follow either of the two courses of action-

Alternative 1: The insurer will not pay any amount for the claim made as it breaches the clause of honesty signed between the two parties during the application procedure of the insurance policy. No action can be taken against the insurance company if the policy holder knowingly supplied false information about their smoking habits.

Alternative 2: In certain rare cases, the insurance provider might compare the amount paid by the policy holder as a non- smoker as opposed to what they paid without declaring the truth about being a smoker. For instance, if the policy holder paid only 60 percent of what he should have, then the insurer will also offer only 60 percent of the agreed benefits of the term insurance policy. This will certainly be insufficient, resulting in dearly costing both you and your family not only financially but also emotionally.

The ramifications of failing to declare your smoking habits during the term of the policy can result in the policy holder getting marked as a fraud or in getting the policy terminated while also losing out on the amount of the premiums paid.

Will the term insurance premium go down if you quit smoking?

Although the premiums of life insurance policies are more expensive for smokers than they are for the non-smokers, they are still within reasonable limits. If the policy holder has resolved to quit smoking they can inform the insurance company. The insurers can then re-access the policy after the period of 12 months once the policy holder has fully kicked off the habit. They can then decrease the premium of the term insurance depending upon the period of time that has elapsed since the policy holder last puffed a cigarette.

In a Nutshell

While there is truth associated with the fact that tobacco addiction causes a high number of health related claims, it is however not the only factor that influences the rise in the rate of premium for term insurance plans. It is a misconception that insurers deny coverage to smokers or that they have problems in making a claim, thus preventing people who have this disagreeable habit from buying an insurance cover. We would only like to suggest that whether you smoke or you don’t, it is favourable to disclose the truth to your insurance provider in order to ensure a smooth claim filing process in the future.