Understanding Term Life Insurance: Smokers vs Non-Smokers

Term insurance plans offer an extensive cover amount that can be considered as a financial substitute for your family in the event of your death. Since term insurers offer such a significant financial perk at extremely affordable premiums, they are “picky” when it comes to offering their plans. Subsequently, there is a long list of eligibility criteria that one needs to meet before he/she can purchase a term insurance plan.

One such eligibility criterion is the lifestyle habits of the policyholder, which majorly focuses on any risky habits (smoking, drinking, etc.) and hobbies that he/she holds. This often sways the insurer’s decisions about whether they will offer a term insurance plan to the applicant or not and also influences the premiums paid towards the policy.

As a brand holding expertise in term insurance & guiding people through the complexities of the plans, we are often asked if

• smoking can be a hindrance to availing of plans,
• what might be the best term plans for smokers, and
• if one can hide this habit from insurers.

So, here is a detailed read on the same!

Smoking and Term Insurance

As per WHO (in 2018),

Considering how a significant share of the Indian population smokes, term insurance providers couldn’t possibly bypass them as potential policyholders, citing future medical complications as a concern.

However, they brought in certain classifications and restrictions that would

• help them determine who among smokers, could be granted term plans
• what kind of smokers would make their cut while applying for term plans.

Also, as smokers, you should expect a spike in premiums as compared to non-smokers.

Who are smokers as per term insurers?

Any individual who consumes tobacco (smoke or smokeless) or nicotine (gutka, bidi, pan masala, cigarette) is a smoker, as per term insurance providers. In general, you are expected to have stopped smoking for at least 1-2 years (varies occasionally from one insurer to another) before you purchase a term insurance plan. While you will still need to declare this history to your insurer, you may not need to pay the spiked premium, as they won’t consider you a smoker anymore.

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How do term insurers identify smokers?

section of this list is dedicated to gauging your lifestyle and habits. You will be looking at questions like –

1. Do you smoke?
2. How many cigarettes do you smoke in a day/week?
3. Do you drink?

-etc.

P.S. If you think you simply mark them in the negatory and become successful in hiding your habit (to secure a lower premium), well you are taking a significant risk.

Here’s an example to understand this better –

Ravindra is a 25-year-old looking to purchase a term insurance policy. Though a smoker, he denied the same when his insurer asked about it on the application questionnaire, since he had stopped smoking a few months before applying.

A few years later, he developed a lung issue and passed away. However, considering how he had failed to mention his history of smoking, the term insurer can now reject his claim, deduct a significant section of his payout, or shut down his policy altogether. This can happen when the insurance company investigates a patient’s medical history.

If they find any evidence (insurers go through your social media account to corroborate your declarations and at times request you to take nicotine tests) that the individual had lied in the application, then they can deny the payout.

Investigations can range from interviews with your friends and family, doctors or a thorough reading of your medical reports.

Term Life Insurance for Smoker vs Non-Smoker

Smoking is a hazard to the health of any individual and makes one vulnerable to multiple fatal or near-fatal ailments. This increases the payout risk for term insurers who will then be tasked to disburse the significant sum assured (plus rider covers, if applicable). Subsequently, there is a steep rise in premiums when it comes to smokers (considering non-smokers as the base).

Here are 2 user cases to understand this better:

CASE 1: Rajiv is a 30-year-old salaried, NON-SMOKER looking for coverage of ₹1 crore till he is 65 years old.

CASE 2: Ramesh is a 30-year-old salaried, SMOKER looking for coverage of ₹1 crore till he is 65 years old.

As you can see there is a 50%-100% spike in premiums in the case of the best term insurance policies available in the market.

What are the best term insurance plans for smokers and non-smokers?

Conclusion

While we have offered you a detailed insight into how term insurance works for smokers, our final thoughts are a common but practical warning –

We would obviously, recommend that you quit smoking at the earliest because let alone the premium spikes on your term plan for smokers, you are looking at severe medical complications that can affect your heart, lungs, and more. Eventually, you will be facing extremely high expenses involved in healthcare and hospitalisation that can severely deplete your savings and leave your family financially compromised.