Life insurance for smokers

Should I tell my life insurance company that I smoke?

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When you apply for life insurance, you'll be asked a number of questions from your age and how often you exercise, to how much you drink and smoke. Why? Insurers want to know how likely you are to make a claim. Basically, they want to know how risky you are to insure.

How risky your insurer thinks you are is reflected in your premiums: the more risk, the more you'll pay. And no one is riskier or pays more than smokers.

Who is a smoker?

You might have you own definition of what constitutes being a smoker but for life insurance, in Australia at least, a smoker is anyone who has used nicotine in the past 12 months. And that includes things like nicotine gum, lozenges, vapes and cigars (more on that later).

How does smoking affect your life insurance?

Smoking makes your life insurance way more expensive. Just how much your premium will change can vary, but typically a smoking habit will just about double your monthly premium.

For example, a 35-year-old non-smoking office worker in generally good health may expect to pay about $40 a month for an $800,000 policy, while the same person with a smoking habit may pay about $80 a month for the same benefit.

Declaring you're a smoker

Now you may be thinking to yourself that it'd be a whole lot easier if you just don't tell your insurance company about your smoking habit. As your insurance company will be having you sign a contract to begin your policy, it is your duty per the "duty of disclosure" to answer every question you are asked as truthfully as possible.

If it's discovered through medical information collected at the point of claim that you were in fact a smoker, you run the risk of your policy being voided. However, in many case your insurer will deduct an amount from your benefit payment equal to the amount you would have paid in premiums until that point if you'd been charged smoker rates.

What if I don't declare that I'm a smoker?

As briefly mentioned above, lying on your insurance questionnaire is not a very good idea as it can get you denied for an insurance policy altogether if you are found to be lying during the application process.

If you are dishonest and still make it through, lying on your application can make you ineligible to receive your insurance benefits if there is an incident that would trigger a pay out by the insurance company. Even though that is the case, a 2016 survey found that 1 in 5 people would lie to their insurance company to save on their premium. While this could save a little bit of cash up-front, the risk is not worth taking.

Under the Insurance Contracts Act of 1984, applicants have what is called a duty to disclose the facts that may be relevant to the insurance company as they make their decision. Not abiding by this act could be considered against the law.

What about life insurance types?

With all the different types of life insurance, you may be asking whether or not a smoking habit can increase life insurance premium costs in all its forms. In most cases, when you're buying an advised product such as life insurance, TPD or income protection, your premiums will be affected if you're a smoker. This is because most insurers collect your smoking information when you're getting a quote for life insurance, which is normally followed by asking whether you want to add on benefits such at TPD or income protection.

Can I get affordable life insurance as a smoker?

If you're a smoker, you may be asking yourself if it's even possible to find affordable life insurance. Bad news: the only real way to find affordable life insurance is to kick the habit, as life insurance policies for smokers cost almost double that of non-smokers.

Do I need to declare I'm a smoker to my super fund?

Now, one work around (kinda) is getting your life insurance through super. As these are group insurance policies in most cases there is no underwriting, which means your cover is provided without you declaring whether or not you're a smoker. However, this is not true of all super funds with some having differentiated rates for smokers and non-smokers.

The downside of this is obviously that you will be slowly chipping away at your super balance, so there will be less left over when it's time to retire and live your golden years, plus you won't get nearly as much cover as you would from a standalone policy.

Who is considered a smoker by insurance companies?

As briefly noted before, a smoker is generally someone who has used tobacco in the past 12 months. While that may seem a bit extreme if you are comparing the pack-a-day crowd to the occasional cigar smoker, insurance companies can vary in their specific definition of smokers.

Some companies may differentiate those who smoke a cigar every year on their anniversary and those who smoke their first cigarette before their cup of coffee in the morning, but in general most companies do not.

When it comes to cigars, unfortunately the occasional smoker is not in the clear. As cigars are made of tobacco, if you have had a cigar in the past 12 months, your answer to the tobacco question would be a "yes" and an increase in the premium you pay is likely. Some companies may have changing rates based on smoking frequency while others may not.

For the cannabis users in the audience, the news is not so great when it comes to life insurance costs for you either. Typically, cannabis use is treated the same as tobacco use in that use in the past 12 months will typically qualify you as a smoker under most companies' policies.

Things are not so clear when it comes to whether or not e-cigarettes and vapes are considered tobacco products. As they only contain nicotine and not tobacco, e-cigs are generally regarded as a much safer alternative to cigarettes.

However, in the eyes of most insurance companies, these are right there with cigarettes and cigars. In the future, there may be changes to regulations that allow for lower insurance premiums for e-cigarette users compared to regular smokers.

What happens if I quit smoking?

If you are considering making the lifestyle change to become a non-smoker, congratulations. As far as your life insurance is concerned, you will need to be tobacco-free for 12 months to be considered a non-smoker. Once that date comes, you can reach out to your insurance company to have your health event taken into account so you can get a lower premium. Depending on your life insurance policy, you may or may not be able to have the occasional smoke for old time's sake.

If you are looking for help in quitting smoking and becoming a healthier you, it may be best to start small and work your way up from there. AIA's program called Vitality can be a great resource as you begin to make this change in your life.

Bottom line

When it comes to reducing your healthcare premiums as a smoker, the best solution would be to kick the habit and become a healthier you. While it may seem like a daunting task at first, the benefits you feel in your everyday life and your wallet can be monumental.

Aside from saving on your life insurance premiums, quitting smoking will reduce your risk of cancer and other diseases, not to mention savings on tobacco products themselves!

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