World No Tobacco Day: Smoking is injurious to wealth — how non-smokers can save up to 50% on term insurance premium

Smoking is injurious to health – everyone is familiar with this public health warning. However, do you know that smoking can also be injurious to your wealth? One of the fundamental pillars of financial planning is buying term insurance. Ultimately, everyone wants to leave behind a legacy of a safe and secure future for their dependents. But obtaining term insurance is subject to various factors and one key factor is taking into account your smoking habits. The good news is if you decide to quit smoking, you gain a chance to save up significantly on your term insurance premium.

The rules of underwriting in insurance for smokers impact the pricing of their term insurance premium. When underwriting criteria and risk profiles are taken into account, a non-smoker will nonetheless end up paying a lower premium than a smoker. Here’s how it works -

Premium for smokers vs non-smokers

Smoking habits adversely affect one's health, longevity and quality of life. This is why they have an implication on term insurance premium rates too. Since ages, smoking has been the cause for deadly diseases like cardiovascular diseases, tuberculosis, lung cancer etc. According to the World Health Organization, tobacco is the cause of death of about 1.35 million people in India each year. Therefore, people who have a high death rate end up paying a higher life insurance premium.

Here’s a brief overview of how the premium differs –

Never hide your smoking habits when buying life insurance

When you apply for life insurance, you'll be asked if you've used tobacco products in the last 12 months to 3 years, depending on the insurer. It is recommended to never hide any information from the insurance company, including your smoking habits. They can also find out about nicotine levels through blood or urine tests. And if found out later, the policy may be revoked by the insurance company or can lead to rejection of claim basis non-disclosure of facts. So, always ensure that you disclose about your smoking habits to the insurer before buying life insurance.

Also, the classification of smokers includes not only smoking cigarettes but also the usage of tobacco-based goods such as cigars, cigarettes, and even chewing tobacco. The insurer also asks for the quantity and duration of such consumption which determines whether the policyholder is a habitual or occasional smoker based on the facts provided. After examining the underwriting requirements, the insurer can decide to raise the premium of the term insurance policy.

The underwriting rules differ from one insurer to another. For instance, some insurance companies state that you can be considered a non-smoker if you haven’t consumed tobacco in any form for the past 12 months, whereas the limit goes up to 3 years for other insurers’ plans. Also, most insurers don’t allow the change in smoking status after buying the term plan. It is, therefore, best to quit smoking if you want to opt for a term plan. So, pledge to protect your health and wealth this World No Tobacco Day and say no to smoking. 

(The author Rhishabh Garg is Head - Term Insurance at Policybazaar.com. Views expressed are personal.)