Smoking and term insurance

If your insurer labels you as a smoker, it places you in the smoker risk category. This means your premium will be higher than it is for nonsmokers

 

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Typically smokers pay higher life insurance premiums than non-smokers at the time of buying a term insurance. The main reason is the mortality rate of smokers is higher than for those who do not smoke. As the probability of dying from smoking-related causes is so predominant, life insurance companies charge higher rates to compensate them for the additional risk of extending a policy.

Most insurers usually assess each case individually, and some companies also differentiate by the amount of tobacco consumed obviously charging moderate users less than heavy users. If your insurance company labels you as a smoker, it places you in the smoker risk category. This means your premium will be higher than it is for nonsmokers.

Term insurance policy

Term insurance policies are ‘protection oriented policies’ which provides a risk cover on the life of the insured at a certain amount of premium for a limited period of time. Some of the variants of terms plans that are available in the market are level term plan, mortgage term plan and return of premium plan.

India’s large younger generation, low life insurance penetration and increasing Internet penetration has attracted insurers to offer online term plans which are designed as a ‘direct to customer’ proposition, cutting down intermediary & operational costs and passing on these savings through lower premiums.

The pricing of term plan typically depends upon the expected mortality rate, operating expenses, persistency expectations and underwriting standards. There are some term plans available in which there are no medical test required and some term plans are also available with the same premium rates for both smoker and non smokers as premiums are already adjusted to compensate the risk.

 

How life insurers define smokers

Insurers’ use some specific questions to classify you as a smoker or non smoker. Using cigarettes, cigars and chewing tobacco will lead you to be treated as smoker. A common question in proposal form is, ‘Have you used a tobacco product in the last 12 months?’ If your answer is “Yes” to this question, then you will most likely be considered in a smoker category and your premium is expected to rise.

According to the frequency of your use of nicotine and age group insurers classify you in smoker, non smoker, preferred non smoker category and charges the premium accordingly at the time of buying term insurance.

The main question is how much does smoking cost, in the form of increased premium where you will find significance variances among all insurers according to their underwriting standards. Typically this extra cost depends upon your age, your health standard and the amount of cover you are taking.

What happens if someone lies to the insurer?

Many smokers are tempted to lie about their smoking habits to the insurer to avoid higher premium rates. This is risky and ineffective usually.

Although it may be easy to hide your habits in the proposal form but it is very difficult to avoid traces of nicotine in your urine sample at the time of medical examination. However, misrepresenting about your smoking habit can create problems at the time of claim.

Suppose you pass your medical exam and secure an insurance policy as being a non smoker. If you die and the insurance company learns that you were a smoker at the time when you acquired the life insurance, this will be considered as a ‘material misrepresentation’ because if the insurer had known about your smoking habit it would have considered your proposal differently, and may have charged a higher premium. In such a case, the life insurance claim could be denied.

The best thing is always to tell the truth from beginning and just accept the fact that if you smoke you will have to pay more for your policy. Insurance companies often have different rules with regard to how long you have to be smoke-free. Since you are buying term insurance for your loved ones, if any unexpected illness happens to you, then you must declare that truthfully to your insurer so that the purpose of buying your insurance will be full filed.

http://www.indiainfoline.com/Markets/News/Smoking-and-term-insurance/5505081659

 

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