Insurers take the risks posed by smoking so seriously that premiums can cost a third more for a 30-year-old smoker.
Smoking’s bad for your health – and your wealth. The UK government levies a large amount of tax to put people off this potentially lethal habit.
But you may not know that, because of the health dangers of tobacco, it has a serious impact on the cost of life insurance too.
Insurers take the risks posed by smoking so seriously that premiums can cost a third more for a 30-year-old smoker, and up to twice as much for a smoker aged 50.
This is because smokers are more likely to claim on an insurance policy due to suffering an early death, or a critical illness.
Kicking the habit is one of the most effective ways of driving down life insurance costs. But for insurance purposes, who’s classed as a smoker?
I have the occasional cigarette. So am I a smoker?
The model insurers work to is simple: if you have used tobacco in the last 12 months, you a smoker.
That includes everyone, from the 20-a-day cigarette smoker, to someone who has a cigarette on a Saturday night as well as the occasional cigar puffer.
Generally, smokers are treated equally by the insurance industry.
That’s because underwriters don’t usually consider how much you smoke when quoting the cost of a premium.
The exception is if the applicant’s elderly or has unusual circumstances and are looking to insure their life for a particularly large amount.
What if I lie about smoking?
Because premiums for smokers are much higher, some people may be tempted to claim they don’t use tobacco, in order to keep costs down.
Insurers will ask a life insurance applicant whether they smoke. Other medical questions will be posed that could suggest a potential customer’s a tobacco user.
Insurance providers also run checks on the medical histories of about one fifth of applicants – which potentially weeds out cheats.
If a policyholder subsequently falls victim to a critical illness, such as cancer, their medical records would flag up whether they’re a smoker to their insurer.
What happens to life insurance cheats?
Life insurance providers have two options when faced with a policyholder who’s lied about smoking when setting up a policy.
The first is to simply not pay out.
The second is to compare how much the policyholder has paid as a ‘non smoker’ against how much they would’ve paid had they declared their habit.
If for example they’ve only paid 60% of what they should’ve, then the insurer would only provide 60% of the agreed benefits.
What if I quit smoking – will my premiums go down?
According to the Association of British Insurers, insurance companies will look into a policyholder’s medical profile if they give up smoking.
They’ll commonly seek a report from a policyholder’s family doctor.
If this raises concerns, they may ask a policyholder to have a chest X-ray. The age of the policyholder and the value of the insurance policy will also be considered.