Quit Smoking or Lose Coverage Impact on Your Term Insurance

 

Smoking doesn’t just cost you ill health and life risks; it can be heavy on your pocket too. No matter if you are a heavy smoker or an occasional one, insurance companies charge you a higher premium because of the higher risk of death associated. Hiding your smoking habit doesn’t help either. That can eventually lead to heavier losses. If you are a smoker, it could be a good idea to quit smoking and then go for insurance to enjoy the full coverage impact of your term life insurance policy.

But what happens if you are a smoker looking to get a life insurance? Here’s a detailed guide to help you.

Definition of smokers in life insurance

The insurance sector defines smokers as those who consume nicotine or tobacco in any form, like cigarettes, nicotine patches, cigars, beedi, paan masala, gutkha, khaini or chewing gum. To check if an applicant has a smoking habit, some of the common questions that insurers ask are:

• Do you consume tobacco/nicotine products?

• Have you ever used a tobacco product?

• Have you consumed a tobacco product in the last four years?

If the answer is ‘yes’ to any of such questions, the policyholder is charged with a higher premium compared to a non-smoker of the same profile. This extra amount for the term life insurance policy is charged to compensate for the risk of lower life expectancy of the insured due to cancer, lung or heart ailments, resulting from the smoking habit.

Types of smokers

Whether you smoke occasionally or regularly, you fall into the smoker’s bracket and premiums will be high. There’s a chance of paying a lower premium only if you have quit smoking and stayed away from tobacco or nicotine products for a considerable period. Insurers further classify smokers into three categories.

Preferred smokers:

Those who are smokers but fit and healthy. They are quoted relatively lower premiums.

Typical smokers:

Those who smoke but have minor health issues. Premiums assigned to this category are higher than preferred smokers.

Table-rate smokers:

Smokers with severe and visible health issues fall in this bracket and are charged higher premiums to balance the additional risk for the insurance company.

How much extra premium is charged to smokers?

The premium rate for smokers varies across insurance companies. The smokers’ premium also depends upon age, gender and health issues alongside other factors.  

What happens when you hide your smoking habit?

One might think that not disclosing your smoking details can help in escaping the higher premium rates. But the consequences can be serious. If you lie about your smoking habits and eventually die within the policy term due to related health hazards, the insurance company can refuse to pay the claim amount to your family. That would lead to a loss of all the premiums paid. Alternatively, the death benefit is paid after deducting the difference in premiums paid by smokers. Either way, it’s the family that suffers.

If the insurance company finds out about your lie while you are alive and within the policy term, that is tantamount to fraudulent activity. Here, the insurer can terminate the policy or make you pay higher premiums.

What happens if you quit smoking after being insured?

Once you are charged with higher premiums because of your smoking, quitting the habit won’t lead to a reduced rate. This is because most insurance companies do not allow a change of status from a smoker to a non-smoker. However, if you can stay away from smoking for a few years, surrendering the old policy and re-applying as a non-smoker can be fruitful. But it’s important to remember that, meanwhile, your age will also increase. Thus, the lowering of premiums as a non-smoker can be offset by higher premiums assigned due to increased age. 

Having a term life insurance policy is essential for a smoker as he/she is more prone to diseases like lung and heart ailments, bronchitis and cancer, leading to lower life expectancy. Thus, securing the family’s future becomes crucial, even with higher premiums payable. 

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ARN - ED/12/23/7054