A policy buyer is expected to divulge the fact whether or not he smokes. Even if he smokes, how often does he need cigarettes in a day to satisfy his cravings?
In case, a policyholder at the time of purchasing a life insurance policy fails to express himself as a smoker, the insurance policy has the right to reject the claim. The insurance company separates the smokers and non-smokers and charges the insurance premium accordingly. Hence, an individual needs to let the insurer appreciate the entire fact of smoking.
Classifications of Smokers for Term Insurance Plan
Generally, an insurance company classifies the policyholders in two different ways.
- Smoker
- Non-smoker
The term insurance plan is an ideal policy to cover the potential risks associated with an individual. It offers a predefined amount for a set period of time. However, the premium amount for such a plan may vary depending on the category a policyholder falls into.
If a policyholder maintains good health and does not smoke, the insurer is likely to approve the insurance proposal made by him. The insurer shall further charge a standard price in such cases. A policyholder should not consume nicotine for a certain period of time in order to qualify for the non-smoker rate. The insurance company is likely to check and verify if the policyholder who applied for a term insurance plan has not smoked for the past 12 months. At the same time, some insurance companies shall also check if the policyholder has not smoked for the past 3 years. The insurance companies have set higher rates for smokers. Hence, people should not smoke or quit smoking in order to avail of the term insurance plan at a standard rate.
Smoker for a Life Insurance Company
The insurance company shall consider an individual a smoker if he answers "Yes" to the question written in the application form as whether the individual smokes or not. An individual shall be considered to be a smoker if he consumes cigarettes, hookahs, cigars, e-cigarettes, or if he chews tobacco, gutkha, etc. However, this shall vary from insurer to insurer. An individual shall fall under the smoker category if he consumes gums or patches.
While filling out the application form, the life insurance company shall or may ask the following questions about smoking habits.
- Whether an individual smokes?
- Whether an individual ever consumed any product of tobacco or nicotine?
- When was the last time an individual smoked?
- How often an individual is habituated to smoke?
- How often or how many cigarettes does an individual consume or smoke in a day?
Whether an individual smokes occasionally or on a daily basis or consumes nicotine products, he should mention such facts in the application form when applying for term life insurance. The insurance company shall regard him as a smoker.
It is important to note that the premium of term life insurance for a smoker is higher than for non-smokers. It could be 50 per cent to 100 per cent higher compared to the standard premium. This is because smokers are more prone to health-related issues. They are likely to suffer from health conditions which stimulates the insurance company to charge higher premiums. Since the term life insurance plan has competitive rates, the insurance company is likely to systematically examine the medical history of smokers and non-smokers. They shall ensure that they are not putting their company at risk by accepting the application of term life insurance for an individual prone to various medical risks.
Case Study
Mr A is a 35-year-old man who smokes occasionally. One day he decided to purchase a life insurance policy. He visited the insurance company and purchased the policy. However, at the time of purchasing the policy, he did not disclose his smoking habits to the insurer. He was under the impression that the non-disclosure of his smoking habit would hardly affect his application process as he was not habituated to smoking on a regular or daily basis. The insurance advisor tried to verify whether he smoked or not. Nevertheless, Mr A remained in denial of such questions.
After some time, Mr A died due to lung cancer. His dependants approached the insurance company for appropriate compensation they were expected to receive. The insurance company verified the cause of death by examining the death certificate. Later, the insurer rejected the claim made by the dependent on account of the hidden fact of smoking that Mr A failed to communicate to the insurance company.
This case clearly shows that the insurer owns all the right to reject the claim made by the policyholder or his dependant in case of non-disclosure of critical facts.
What if a Smoker Becomes a Non-Smoker?
A policyholder after quitting smoking may make a request to the insurance company for the recalculation of the premium and classify him in the category of non-smoker. The insurance company shall decrease the premium amount based on the last time the policyholder smoked. However, it is important to note that every insurance company has framed its own rules and regulations to classify the insured as a non-smoker. If the policyholder has not smoked for more than two years, he shall be considered as a non-smoker.
Conclusion
A policyholder should always speak the truth from the inception of the policy. He must accept that he smokes and the premium shall be more for non-smokers. The insurance company has various regulations which state how long the policyholder should be smoke-free to be verified as a non-smoker. The policyholder must inform the insurance company if he suffers from an unforeseen disease because of smoking.
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FAQs
Q. What if a policyholder hides his smoking habit?
A. A smoker may refrain from disclosing the fact that he smokes. However, the non-disclosure of smoking status may create various issues. The insurance company is likely to identify whether the person smokes or not at the time of submitting the application form. In case of any ill will or if bad faith is found, the company shall reject the application during the underwriting process.
Q. What are the differences between smokers and non-smokers in life insurance plan?
A. Difference between smokers and non-smokers in life insurance plan.
| Basis | Smoker | Non-Smoker |
|---|---|---|
| Premium | The premium shall be higher if the policyholder smokes. | The premium shall be lower as compared to the category of policyholder falls under smoker. |
| Life Expectancy | The life expectancy in the case of smoker is lower. | The life expectancy in case of non-smoker is higher. |
| Mortality Rate | The smokers are more susceptible to illness. Hence, the mortality rate is higher. | The mortality rate is lower for non-smokers. |
Q. What are the benefits of a life insurance policy?
A. Following are the benefits of life insurance policy.
- Covers financial expenses
- Offers financial coverage to dependents
- Insurance payouts are tax-free
- Offers coverage for terminal and chronic illness
- Supplement the retirement
Q. Why do smokers pay a higher premium as compared to non-smokers?
A. Smokers are more susceptible to disease. Therefore, they are bound to pay higher premiums.
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