Are cigarettes really that expensive? Well, it turns out they can cost you a lot more than you think in the long run, and it's not just about your health or medical bills. Smoking can also hit you where it hurts – your life insurance premium. Let's break down how smoking affects your life insurance, how much it can increase your costs, and what you can do to ease the burden.
Smoking and Life Insurance Premiums
It's no secret that smokers face a higher risk of serious illnesses and premature death. Rishabh Garg, Head of Term Insurance at Policybazaar.com, points out, "Smoking is linked to major health issues like heart disease, lung cancer, and respiratory problems. Insurers see smokers as 'higher-risk' individuals."
Because of this higher risk, insurance companies charge smokers higher premiums compared to non-smokers. It makes sense – smokers are more likely to make claims, which means more financial risk for the insurer.
How Do Insurers Define Smokers?
Life insurance companies have specific criteria for classifying someone as a smoker. Pankaj Goenka, Assistant Vice-President & Head of B2B Business at InsuranceDekho, explains, "You're considered a smoker if you use nicotine in any form, such as cigarettes, cigars, or chew tobacco." Even if you use nicotine patches or gum, you might still be labeled as a smoker.
To determine your smoking status, insurers typically ask questions like: a) Do you use nicotine or tobacco products? b) Do you smoke? c) Have you used tobacco products in the last five years? d) Have you ever used tobacco products?
If you answer 'yes' to any of these questions, you're likely to be classified as a smoker, which means you'll fall into the high-risk category and pay higher premiums.
How Much Extra Do Smokers Pay?
The additional premium smokers have to pay varies among insurance companies. Generally, the difference between premiums for smokers and non-smokers is around 30%. However, the rates for smokers can be 50% to 80% higher than those for non-smokers, according to Rishabh Garg. For example, a 28-year-old non-smoker might pay an annual premium of Rs 11,385 for a Rs 50-lakh term insurance policy. In contrast, a 28-year-old smoker could pay an annual premium of Rs 17,949, which is 58% higher. Keep in mind that insurance companies also consider other factors when calculating your premium, such as the type and amount of coverage, your age, and your overall health.
Occasional Smokers Beware
Insurance companies usually don't differentiate between occasional and regular smokers. Even if you smoke occasionally, you must declare yourself as a smoker when purchasing a policy. Attempting to classify yourself as a non-smoker to get a lower premium can have serious consequences.
When you buy a term plan online, you're entering a legal contract with the insurance company, and honesty is crucial. Lying could lead to the policy being canceled or claims being denied.
Quitting Smoking After Buying a Policy
Once you've purchased a term insurance policy as a smoker, you can't typically change your status to non-smoker during the policy's term in India. While some insurers may offer discounts to policyholders who quit smoking, you'll likely need to undergo medical tests to qualify. However, you can quit smoking, wait for a specific period, and then purchase a new term insurance policy as a non-smoker. In that case, your premiums might be lower.
How Long Should You Quit Smoking?
The waiting period for non-smoker rates after quitting smoking varies among insurers. Generally, you should stay smoke-free for at least 12 months to qualify for non-smoker premium rates. Some insurers might require you to be smoke-free for up to five years.
Starting to Smoke After Buying a Policy
If you've already purchased a term plan as a non-smoker and later become a smoker, your policy's premium won't be affected. However, it's best to inform your insurance company, as failing to do so could delay the payout during a claim verification process.
In conclusion, smoking can significantly impact your life insurance premium. It's important to be honest about your smoking habits when purchasing a policy, and quitting smoking can eventually lead to lower premiums. Remember, it's not just about the cost of cigarettes; it's about the long-term financial impact on your insurance coverage.
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