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Life Insurance and Electronic Cigarettes
Is Life Insurance Cheaper for E-Cigarette Smokers?
The impact that smoking can have on your health has been well documented over the years. We all know that giving up the cancer sticks is the best thing to do for our health, but there’s also another great reason to quit: you can make great savings on your life insurance premiums.
When insurance companies assess your application for life insurance cover, your smoking habit is understandably seen as making you much more of a risk to insure. With all the health problems smoking is linked to, most notably cancer, if you’re a smoker your risk rating is likely to be very high. In fact, thanks to the many dangers associated with smoking, smokers pay much more for their insurance premiums than non-smokers—sometimes more than double.
Give up smoking, however, and your premiums will be lowered considerably. Electronic cigarettes, a relatively new entry to the market, may also offer smokers a chance to lower their premiums and save a significant amount of money in the long run.
What is an Electronic Cigarette?
Electronic cigarettes, also known as e-cigarettes, are battery-powered devices designed to imitate smoking. They emit a vaporised solution that users can inhale. This solution can include nicotine and certain flavourings, or can be made without any nicotine.
These types of cigarettes first appeared on the Chinese market in 2004, and are often marketed as a healthier alternative for tobacco smokers who do not actually want to inhale any smoke. Tobacco smoke from a regular cigarette contains many chemicals which are hazardous to human health, while electronic cigarettes eliminate these chemicals and don’t expose users to tar or other carcinogens.
Electronic cigarettes are long tubes designed to mimic smoking implements, such as cigarettes or cigars. Some are even designed to look like ballpoint pens. Using an electronic cigarette is often referred to as vaping.
While some e-cigarettes are disposable, most are designed to be reusable, offering cartridges that can be replaced or refilled. They typically feature a heating element which is activated when the user sucks on the device. This vaporises the liquid solution contained inside the electronic cigarette and then emits the vapour for the user to inhale.
Even though e-cigarettes are readily available in Australia, it’s illegal to sell an e-cigarette vial or cartridge containing nicotine. It is, however, legal to purchase these from overseas.
Will E-Cigarettes Reduce the Cost of Life Insurance for Smokers?
There is also a possibility that switching from regular cigarettes to e-cigarettes could help reduce the amount you have to pay for your life insurance premiums.
In the UK in late 2013, a Manchester-based company named Sutton’s Independent Financial Advisers began offering e-cigarette smokers up to a 40 per cent reduction on life and health insurance premiums.
Harvey Sutton explained the move. “All insurers ask questions about tobacco use and many, but not all, ask specific questions about nicotine. We sought situations where e-cig users could honestly answer questions relating to their use of tobacco products,” he said.
“Electronic cigarettes are not tobacco products. We spoke to the underwriters in question: we are not doing this without underwriters’ knowledge.”
Policies with lower premiums have been successfully obtained for a number of Sutton’s clients, but this is currently far from a widespread practice. A push is underway, however, to see e-cigarette smokers be charged cheaper insurance premiums than those who smoke regular cigarettes. And if there’s no nicotine in your electronic cigarettes, you should be able to pay less for your life insurance premiums.
If insurance providers follow this lead from the UK and begin offering additional tests to check for tobacco damage among insurance applicants, switching from normal cigarettes to electronic cigarettes could save you money. The approach to e-cigarettes and their effect on premiums can, however, differ from one provider to the next.
Life Insurance and E Cigarettes in Australia
Though e-cigarettes are regularly marketed as being better for you than normal cigarettes, there is no great weight of research to back this up. Very little study has been done into the health impact of electronic cigarettes, either in terms of long-term effects or any consequences of second-hand inhalation.
Regardless of whether you smoke regular cigarettes or electronic cigarettes, smoker premiums will still apply to your life insurance policy. This of course results in much higher premiums than for non-smokers. A non-smoker is typically classed as a person who has not smoked a cigarette, or used nicotine or any variety of nicotine-replacement product, within the previous 12 months before applying for insurance.
If you’ve smoked marijuana at some stage during the past 12 months, you’ll also be defined as a smoker for insurance purposes.
However, depending on which insurance provider you choose to take out life insurance cover with, you may be able to secure cover with cheaper premiums. This will depend on the type of e-cigarette you use, especially whether or not you use electronic cigarettes that contain nicotine.
If there’s no nicotine in your electronic cigarettes, you may be able to save money on your premiums.
What if I was a smoker when I took out cover but have since quit?
If you are able to show your insurer that you have quit smoking and have not smoked for at least 12 months, you can apply to have your policy re-evaluated to reflect non-smoker status.
Benefit of quitting smoking to reduce life cover premiums
Unless you’ve been living under a rock for the past few decades, chances are you’re well aware of the many dangers associated with smoking. The simple fact is that quitting smoking at any stage can add years to your life and vastly improve your overall health.
But if the health implications of smoking aren’t enough to make you kick the habit, consider smoking from a life insurance point of view. Because of the many risks associated with smoking, if your insurance provider classifies you as a smoker then you’ll end up paying much larger life insurance premiums. And insurance providers will sometimes not differentiate between casual smokers and pack-a-day puffers—if you smoke at all, you could be made to feel the effect on your back pocket.
Switching to e-cigarettes is another option that could potentially help you save a significant amount of money when investing in life insurance cover. Some insurance companies will offer cheaper premiums if you use a type of electronic cigarette that does not contain nicotine.
The approach to e-cigarettes and life insurance premiums will differ between providers, but if you do your research and find the right cover for your situation, using electronic cigarettes instead of smoking regular cigarettes could give your wallet a much-needed boost.
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