When you are the breadwinner of your family, it is your responsibility to take care of the financial well-being of your family. You also need to ensure that in case you suddenly lose your life, the quality of your dependents is not hampered. This is exactly what life insurance takes care of. When you buy a life insurance policy, the premiums that you pay are used to provide you with a life cover. In case of your sudden demise during the tenure of your policy, the nominee of your life insurance will receive the sum assured. Life insurance acts as a financial shield for your loved ones in your absence. If you have the habit of smoking, your premiums will be affected when you buy a life policy. This is because smoking is directly related to a poor quality of life.
Here is everything you need to know about how smoking affects your life insurance:
Whom do life insurance companies consider as smokers?
Insurance companies consider a person who consumes tobacco or nicotine as a smoker. The individual may indulge in the smoking or smokeless consumption of tobacco or nicotine. Cigarette, gutka, bidi, and pan masala are some examples of tobacco-containing or nicotine-containing substances. The insurance companies consider these habits as they directly affect the quality of life of the policyholder. When a policyholder is filing the proposal form, there are several questions in it that help an insurance company to determine whether an individual is a smoker. Insurance companies can also know about your nicotine or tobacco consumption by examining your past medical records.
The smoking habits of every individual are different. Therefore, insurance companies have categorized different smokers based on the intensity of their smoking habit:
- Preferred smoker
A preferred smoker is an individual who smokes but is medically fit and active. The premiums of these types of smokers are a lot less than other types of smokers.
- Typical smoker
An individual who smokes and has minor health issues is usually how most typical types of smokers are. The premium prices for typical smokers are higher than preferred smokers.
- Table-rate smoker
A person whose health has been damaged severely because of their smoking habit is known as a table-rated smoker. Premiums of the life insurance for these individuals are much higher than the other two types. This is because the policyholder’s quality of life is already affected because of the existing health-related issues.
All individuals who smoke are usually eligible for availing of life insurance plans. However, the classification helps insurance companies to calculate the premiums of different individuals based on their intensity of smoking habit.
Why do smokers pay higher premiums than non-smokers?
Smoking is not good for an individual’s health. It leads to severe and chronic illnesses such as lung cancer, respiratory diseases, heart diseases, and bronchitis. Any individual can be diagnosed with these diseases. However, there is a higher chance of a smoker being diagnosed than a non-smoker. Smokers have a lower life expectancy ratio than non-smokers. Life risk is one of the most important factors that an insurance company takes into consideration while quoting the premium to a policyholder. For an insurance company, the risk of providing life insurance to a policyholder who smokes is higher than the one who does not. This is how smoking affects your life insurance premium adversely. Along with smoking, age, health, and coverage amount are other factors that an insurance company takes into consideration while calculating your premium.
Several policyholders consider lying about their habit of smoking in order to avoid paying high premiums for life insurance plans. They hide the details while filling out the proposal form of their insurance policy. However, they miss out the fact that during medical tests and examinations, there can be traces of nicotine detected. When the policyholder has filed for a claim, hiding details might create problems. The insurance company has the right to terminate the policy and even charge a fraud case against the policyholder. How lying about smoking to the insurer can affect your policy is much worse than how smoking affects your life insurance premium.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.