Life Insurance For Smokers: Term Policy Options

Smoking is known to have adverse effects on health and is a leading cause of preventable diseases and deaths. This makes smokers a high-risk category for insurance companies, and they often end up paying higher premiums than non-smokers. Despite this, smokers can still get term life insurance, although they may face higher premiums, different policy options, and stricter requirements.

Life insurance for smokers: what are the options?

Smoking is known to have adverse effects on health, and it is considered a high-risk activity by insurance companies. As a result, smokers are often charged higher premiums for life insurance policies than non-smokers. However, smokers can still find life insurance options that offer reasonable rates and financial protection for their loved ones.

When applying for life insurance, individuals will typically be asked if they smoke. It's important to note that smoking is not limited to cigarettes and can include other forms of tobacco and nicotine consumption. This may encompass vaping, e-cigarettes, cigars, nicotine replacement therapies (patches, lozenges, gum), heated tobacco products, and even marijuana use, depending on the frequency.

Life insurance companies classify smokers into different risk categories, which determine the cost of insurance. Smokers with no other health issues may be considered "preferred smokers" and pay lower premiums compared to other smoker categories. "Typical smokers" may have minor but lingering health issues and are likely to pay higher premiums. Smokers with evident health problems are considered high-risk and are charged significantly higher premiums.

Applying for Life Insurance as a Smoker

When applying for life insurance as a smoker, it is crucial to be honest about your smoking habits. Misrepresenting or lying about your smoking status may result in denied coverage or a higher premium if the insurance company discovers the truth. Most life insurance companies will require a medical exam, including blood, saliva, or urine tests, to detect the presence of nicotine or its byproducts in your system.

Types of Life Insurance for Smokers

There are several life insurance options available for smokers:

• Term life insurance: This is the simplest and most affordable type of life insurance for smokers. It offers coverage for a specific term, usually 10 to 30 years, with fixed premiums. If the insured person passes away during the term, their beneficiaries receive a death benefit.
• Whole life insurance: Whole life insurance is a permanent policy that provides coverage for the insured's entire life. It includes a death benefit and a cash value component that earns money in a tax-deferred account, which the insured can access during their lifetime.
• Final expense insurance: This is a type of permanent life insurance designed to cover expenses that arise during the final stage of life, including medical bills, legal costs, and funeral expenses.
• Guaranteed-issue life insurance: This type of insurance does not require a medical exam or health screening, making it appealing to smokers or those with existing health conditions. However, coverage limits are usually capped, and premiums are based on age, gender, and desired coverage amount.

The Cost of Life Insurance for Smokers

Smokers typically pay significantly higher premiums for life insurance compared to non-smokers. The increase in rates varies depending on age, gender, and coverage amount. On average, smokers can expect to pay double or triple the rates of non-smokers for similar policies.

Quitting smoking can have a positive impact on your life insurance rates. Most insurance companies require individuals to be nicotine-free for at least 12 months before they are considered for non-smoker rates. After quitting, you can request a re-evaluation of your policy, which may result in a lower premium if you are reclassified as a non-smoker.

In summary, while smoking does impact life insurance rates, smokers have several options for obtaining life insurance coverage. It is essential to be honest about your smoking status and compare quotes from different insurance providers to find the best rates and coverage that suit your needs.

How much more do smokers pay for life insurance?

Smoking is the leading cause of preventable death in the US, according to the Centers for Disease Control and Prevention (CDC). It accounts for 480,000 deaths (1 in 5 deaths) per year. This is why smokers generally have to pay higher life insurance rates than non-smokers.

Tobacco use is a proven health risk and impacts life expectancy, which is a major cost factor when life insurance companies set their rates. Smokers can pay nearly four times more for a life insurance policy compared to non-smokers. For example, a healthy 40-year-old male of average weight and height would pay $397 per year for a 20-year $500,000 term life insurance policy. The same policy would cost a smoker $1,531 per year.

However, the cost increase for smokers varies by age, gender, and coverage amount. For example, a 20-year, $500,000 term life insurance policy for a non-smoker could be $33 per month, while a smoker could pay $70 per month.

Each life insurance company has its own method of classifying smokers. While cigarette smoking almost always leads to someone being assigned to a smoking risk class, other forms of tobacco usage may be classified differently. For example, someone who occasionally smokes cigars or chews tobacco may be classified as a non-smoker by the insurer.

When applying for life insurance, it's important to be truthful about your smoking habits. Life insurance companies have various ways to verify your answers, including medical exams, medical records, and social media. If you lie on your application, you may be denied coverage or see a surcharged rate.

If you have plans to quit smoking in the future, it's still a good idea to purchase a life insurance policy now to protect your loved ones. If you already have a policy and quit smoking, you may be able to ask your insurer for a re-evaluation to change your risk class and lower your cost. Most insurers require you to be tobacco-free for 12 months before they will consider reclassifying you for non-smoker rates.

How do life insurance companies detect smokers?

Life insurance companies use several methods to verify whether an applicant is a smoker or not. While it might be tempting to lie about your smoking status, doing so can do more harm than good. If an insurance company finds out that you lied on your application, they may deny you coverage altogether.

Medical Exam

One of the most common ways to detect smokers is through a medical exam, which may include testing for nicotine or its byproducts, like cotinine, in your blood, urine, or saliva. Even if you claim to have quit smoking, these tests can detect nicotine for several days or weeks, depending on how much and how often you used tobacco.

Medical Records

Insurance companies may also request access to your medical records, which could reveal a history of smoking or treatments related to smoking-related illnesses.

Third-Party Databases

As no-medical-exam life insurance policies become more popular, insurers have started to use technology to verify smoking status. Many insurance companies run reports from third-party databases that aggregate data from health and lifestyle sources. These reports can reveal previous life insurance applications or claims, which might include information about your smoking status.

Social Media

Insurance companies are increasingly using social media sites, such as Facebook, to look for evidence of factors that affect rates, including smoking.

Voice Analysis

Verisk provides life insurance companies with analytics that predict whether you're a smoker from the sound of your voice, combined with other data such as demographic and socioeconomic information. When you answer life insurance application questions over the phone, you could be recorded. Verisk can then analyze these recordings and flag people who are likely to be smokers.

What happens if you lie about smoking on your application?

Lying about smoking on your life insurance application is a bad idea and can have serious consequences. While it may be tempting to misrepresent your smoking status to secure a lower premium, doing so constitutes insurance fraud and can lead to significant problems down the line. Here's what you need to know about the potential fallout from lying about smoking on your application:

Policy Cancellation and Denial of Claims

Lying about smoking can result in your policy being cancelled or voided, either during the application process or within the contestability period, which typically lasts for the first two years of the policy. Insurance companies conduct thorough background checks, including medical exams and reviews of medical records, making it difficult to hide your smoking habit successfully. If they discover your dishonesty, they may cancel your policy or deny any claims made during the contestability period. This means your loved ones could be left without the financial protection you intended to provide.

Financial Hardship for Your Beneficiaries

If you pass away during the contestability period and it is revealed that you lied about smoking, your beneficiaries may face financial hardship. The insurance company may decrease the death benefit or deny the claim altogether. This could leave your dependents without the financial support they were counting on during an already difficult time.

Legal Consequences

Insurance fraud is a serious offence and lying on your life insurance application can have legal repercussions. Intentional fraud can result in fines, restitution, or even jail time. It is always best to be honest, even if it means paying higher premiums, to ensure that your policy is honoured when your family needs it most.

Higher Premiums or Reduced Coverage

In some cases, instead of outright denial, the insurance company may adjust your premiums or reduce your coverage once they discover your dishonesty. They may reclassify you as a smoker, resulting in higher premiums to reflect the increased risk. Alternatively, they may reduce the amount of the death benefit, leaving your beneficiaries with less financial support than you had intended.

Delays in Claim Payouts

Even if you manage to hide your smoking status during the contestability period, the truth may still come out later, causing complications and delays in claim payouts. It is always best to be upfront about your smoking status to ensure that your policy is valid and your loved ones are fully protected.

In conclusion, lying about smoking on your life insurance application can lead to a range of negative consequences, from policy cancellation and denied claims to legal repercussions and financial hardship for your beneficiaries. The best approach is always honesty, even if it means paying higher premiums. This ensures that your policy remains valid and your loved ones receive the financial protection they need.

What happens if you quit smoking?

If you quit smoking, you may be able to get a better price on your life insurance. However, it's important to note that not all insurance companies will allow you to change your term insurance status from smoking to non-smoking. In some cases, quitting smoking may not have any impact on your premium or policy.

If your insurance provider does not allow you to change your status, you can choose to continue with your current plan or, after several years of being tobacco-free, you can re-apply for a new term plan as a non-smoker. If you choose the latter option, you must be honest about your previous smoking habits and accurately state how long you have been tobacco-free. Qualifying as a non-smoker could result in lower premiums. However, since you will be older than when you purchased your previous policy, the premium benefit may be negligible or cancelled out.

Some insurers will allow you to apply for reconsideration of your plan if you have not used tobacco products for several years. They may consider reducing your premium if you are tobacco-free, but it will likely still be higher than if you had never smoked.

If you already have a life insurance policy and you've quit smoking, you can ask your provider for a rate reconsideration. They will likely require you to take another medical exam, and your health will be re-evaluated. If you've developed new medical conditions since your last exam, these may also factor into the new rate.

It's important to note that the non-smoking time length rules vary among insurance companies, but generally, you need to be nicotine-free for at least 12 months to be considered a non-smoker.

Frequently asked questions