Life Insurance and Smoking: Essential Reading

Health risks aside, what are the financial implications with life insurance and smoking?

Original article by Florida life insurance underwriter Tim Matthews, published June 9th 2008

We all know at least one smoker. There is a high chance that you have at some point been a smoker yourself. It’s possible that you still smoke.

We all know the health risks associated with smoking, and we know that as well as being detrimental to your health, it can also affect your bank balance. Not only are there high taxes levied on a packet of smokes, but with it being highly addictive, your habit will usually mean a regular daily outgoing of $10 or more.

In addition to the high price of cigarettes and other tobacco products, there are also negative financial effects when it comes to life insurance and smoking.

Just as with those convicted of DUI’s paying more for car insurance, smokers are considered a higher risk to insurance companies. This will be reflected in your premium as those placed in a smoking category will undoubtedly pay several times more than their non-smoking counterparts.

Having said that, insurance providers assess each individual case on its own merits. Those smokers or former smokers looking to buy life insurance may ask the following questions before entering into a life insurance plan…

How are smokers defined by life insurance companies?

There are specific guidelines to categorize smokers for underwriting purposes. In fact it isn’t just the act of smoking that will place you in the life insurance and smoking category, but rather the use of tobacco products as a whole, including chewing tobacco. Quitters who use nicotine replacement therapy, such as patches and chewing gum will have sufficient nicotine levels to qualify as a smoker.

You will often be asked upon application whether you have used any tobacco product over the last year. Anyone who answers in the affirmative will undoubtedly be placed in the life insurance and smoking category and should expect to pay higher rates. It’s not usually a case of how much you smoke; the guidelines are black and white. You either use tobacco or you don’t. As far as life insurance and smoking is concerned, the health risks for smokers are equal.

This may not seem fair, but those with a regular smoking habit will often have health problems as compared to those who smoke, say, a pack a week. These issues will also raise their premium, as health is also categorized, following the routine paramedical examination. These four categories are listed in order, Preferred Plus being allocated for the best level of fitness:

• Standard
• Standard Plus
• Preferred
• Preferred Plus

Age and fitness are taken into account as well as lifestyle choices. Therefore a non smoker may also fall into the same category as a smoker, but the smoker will still have to pay a far higher premium.

What about life insurance and smoking of cigars?

Cigar smokers are often occasional tobacco users who don’t smoke often enough to become heavily addicted to nicotine. Also the way in which cigar smoke is only partially inhaled means that there is a lower chance of contracting respiratory or circulatory problems. Insurance companies know this and will ask you how often you partake. There are even companies such as Beyondquotes.com which offer life insurance and smoking of cigars, exclusively.

How higher are smoker’s life insurance premiums as compared to non-smoker rates?

This is the question on every smoker’s lips when applying for a policy. The trick is to shop around. Get multiple quotes from a variety of insurance carriers and you’ll see for yourself just how varied they can be.

As we said before, each case is assessed individually and there are other factors to take into account, particularly age and health. As a rule of thumb, we’ve noticed that life insurance and smoking will usually cost a whopping four times non-smoker rates, often even more.

Is it worth lying on your policy application? What are the penalties?

Insurance fraud is a big deal in any instance. You may think that a little white lie on your policy application is OK, but it is usually the policyholder or their dependents who lose out. The underwriting process is stringent and has evolved over centuries to guard itself against misleading applications. It is often when it is time to claim on a policy that untruths are discovered, resulting in denial of the claim.

Your medical records are kept on a central database by the Medical Information Bureau (MIB), so insurers can access all your details upon your application. You cannot apply for another policy without the next insurance company finding out the results of your previous application.

If you’ll excuse the pun, honesty is the best policy when applying for insurance. The whole purpose of life insurance is to secure your finances, and even if you have to pay a little more, the knowledge that you are secured is well worth it. If you do manage to quit, then you can apply for a reclassification a year later and your premium rate will usually be reduced.

JM 150 907 9-4-12