A Short Guide to Life Insurance for Smokers

May 31 is celebrated globally as ‘World No Tobacco Day’. To mark the occasion, in 2018, the World Health Organisation (WHO) issued a report on worldwide trends in tobacco usage. The report showed that tobacco usage in India has dropped by 19.4% in 2000. It also predicted that by 2025, the numbers will further reduce to 8.5%. However, India has one of the largest populations in the world. And so, despite this drop in smokers, tobacco use is still prevalent around the country. While tobacco warnings go unheeded by users, the same can’t be said for life insurance companies.

Tobacco Use in India

Tobacco use has indeed reduced in India. But it still has one of the largest tobacco chewing and smoking populations in the world. In a disheartening report, more than 625 lakh Indian children between the ages of 10 and 14 are daily smokers.

The government has made tremendous efforts to reduce and restrict the use of tobacco. There are extensive anti-tobacco campaigns on radio and television. All of us would have seen the anti-tobacco advertisements at the movie theatres. The warnings on cigarette packets have also gotten more graphic. Moreover, cigarette advertisements and smoking in public places are banned. 

However, the statistics are still grim. According to a 2016–17 report by the Global Adult Tobacco Survey India, 267 lakh Indians above the age of 15 use tobacco. In India, the most popular form of tobacco is smokeless tobacco, aka products such as gutkha, khaini, and so on. The smoking forms are bidis, cigarettes, hookah, and e-cigarettes. 

After China, India has the second-largest tobacco-consuming population. In 2018, tobacco accounted for one lakh deaths in the country. Tobacco in its myriad forms is responsible for 9.5% of all deaths in India. Most people are aware that tobacco can cause cancer and lung disease. Oral cancer makes up approximately 30–40% of cancers in India. But many people do not know that it also causes cardiovascular disease and strokes. A whopping 48% of tobacco-related deaths are made up by cardiovascular disease. 

How does this Affect Life Insurance for Smokers?

Life insurance companies define smokers as anyone who uses tobacco in any and every form in the previous year. This includes cigars, cigarettes, bidis, gutkha, pan masala, and khaini. The definition also covers those who use nicotine patches or nicotine chewing gum.

As evidenced by health reports, tobacco use is hazardous for health. It affects the quality of health and life and may result in critical illnesses and even death. For this reason, smokers/tobacco users are an added risk for life insurance coverage compared to non-smokers.  Thus, smokers/tobacco users are charged higher premiums on life insurance policies. Other than tobacco use, age and existing health conditions are also factors when setting premiums.

What Questions are Asked by Life Insurance Companies?

The following questions are posed by insurance companies when you apply for a life insurance policy:

• Do you consume tobacco or nicotine products?
• Have you used a tobacco product in the last six months?
• Do you have any health issues caused by smoking/tobacco use?
• How many cigarettes do you smoke in a day?

What Happens If You Withhold Information on Your Smoking Habits?

Smokers often have to pay approximately two times the premium for non-smokers. It is no wonder that applicants often withhold information on their smoking habits. But this is the wrong thing to do. Both regular smokers and those who smoke occasionally in the past one to two years should answer ‘yes’ in the life insurance forms. The reason is that if the insurance provider makes you undergo a medical examination, then your tobacco use will come to light. Insurers often perform pre-verification checks on applicants. Again, they will reiterate the importance of providing full information on your health condition and smoking habits.

Remember, life insurance is a legal contract between you and your insurance provider. Withholding of such information could result in your application getting rejected. You could be held liable by the insurer for partaking in an insurance scam. Your entire policy could be declared invalid by the insurance company.

Sometimes you may not need to undergo a medical examination when applying for life insurance. It is still imperative to be honest on your form. Suppose you make a claim and your insurance provider finds that you have withheld information about your tobacco use. Your claim can be outright rejected by the provider. In another scenario, the insured person passes away and their medical report reveals a smoking-related illness. Here, the death benefit would be denied to the beneficiaries.

What if you start smoking after you have taken a life insurance policy? You must inform your insurance provider. Here too, if the provider finds out later that you are a smoker, all benefits could be withheld.

Thus, to safeguard your finances and the future of your loved ones, you must be honest and transparent with your insurance provider. Do not leave your loved ones stranded and facing a legal hassle by lying to your insurer.

Which Medical Tests Reveal Tobacco Use?

Life insurance companies may utilise medical tests before issuing a policy. There are medical tests that can reveal tobacco/nicotine use. The tests could be via blood tests, urine sample tests, or saliva or hair tests. On occasion, a hair test can reveal tobacco use even up to a year later. Sometimes X-rays may reveal a habit of smoking.

What Happens If You Quit Smoking/Tobacco Use?

If you quit smoking or any type of tobacco use during your coverage period, you should inform your insurance provider. If you can kick the habit for good, the provider can classify you as a non-smoker. Most providers would require you to be tobacco-free for at least one to two years before classifying you as a non-smoker. They will probably require you to undergo a medical examination to verify the same. As tobacco/nicotine can linger in parts of the body for a year or more, it is better to inform your provider after sufficient time has passed. At that time, you can ask your insurer to revise the rates on your premiums.

On the other hand, you may be tempted to not take life insurance until you have quit smoking. But that is not a wise decision. It may take you years to quit and in the meanwhile, your age will also increase. Remember, age is a factor when considering your premium. It is better to take insurance even at the cost of a higher premium than set it aside for a later unknown date. Older individuals anyway have to pay higher premiums.

What can Smokers do to Avail Affordable Life Insurance?

Here are a few options that smokers can choose to avail affordable life insurance:

• Choose a Term insurance Plan
  Term insurance is a pure form of insurance coverage where there is no maturity benefit but only a death benefit. Term insurance plans are quite basic and do not have the element of investment. Hence, they are far more affordable compared to endowment plans.
• Go Online
  Buying life insurance online effectively cuts out any middleman, thus, reducing costs for the insurer. This translates to lower premiums offered to applicants.
• Look for Discounts
  While looking for life insurance, choose one that is offering a discount. Discounts are often available on plans that are bought online instead of through a broker. Still, however, you may receive a discount on an offline plan as well.
• Buy Early
  Younger people often have the advantage of being healthier than their older counterparts. This translates to lower premiums as the applicant will likely not have any major issues. Thus, a 27-year-old smoker will pay a significantly lower premium compared to a 40-year-old smoker.
• Shop Around
  Don’t rush to buy life insurance. Spend time and research the various policies. Read about the different types of life insurance and their benefits online on aggregator websites and insurer websites. If possible, speak with a financial advisor to cut through the chaff and understand the real benefits of each policy.

What do Smokers Gain by Buying Life Insurance?

• Peace of Mind
  Life is uncertain and unpredictable. A life insurance policy can be a cornerstone of all your future financial plans. It acts as a backup in case of any unfortunate circumstances. So you can have peace of mind that you have done all that you could to safeguard your future.
• Protect your Loved Ones
  By investing in a life insurance plan, you will protect your family’s financial future. Your family would be provided for and the payouts from the insurer can go a long way in taking care of future expenses that they would have to bear.
• Tax Savings
  There are three types of tax savings available when you buy life insurance. Under Section 80C of the Income Tax Act, you can claim a tax deduction of up to Rs 1.5 lakh on your premium payments. Section 10 D (10D) allows the entire death benefit paid to the beneficiary to be wholly tax-exempt. If you choose to avail of a health benefit rider, then you can enjoy an added tax exemption on that as well.
• Increase Your Coverage With Riders
  Smokers are often more susceptible to certain critical illnesses. So you can opt for a Critical Illness Benefit Rider that covers heart attacks, strokes, cancer, kidney failure, and so on. On the diagnosis of the critical illness, the insurer pays a lump sum amount to the policyholder.

In conclusion

Smokers can pay 30–50% higher premiums compared to non-smokers. So, quitting smoking can save your life, health, and wealth. However, it is easier said than done. Smoking is an addictive habit that is hard to break. Nevertheless, don’t let these factors stop you from availing of life insurance.  Research thoroughly and secure your family’s future by choosing a suitable life insurance plan today.