Smoking and your life insurance premium
First, let’s take a look at the basics of life insurance. A life insurance policy provides you with financial protection. In return, you must pay a monthly or annual fee, called the premium. What happens if you die? Your beneficiaries get an amount of money specified in the contract, the death benefit. They can then use this money to pay off your debts and mortgage and pay for your other living expenses.
What type of life insurance do you need?
Life insurance: term, permanent… both?
Life insurance can help families and provide financial security after death. So how do insurers establish the value of this security? The size of the life insurance premium largely depends on your current state of health and your family history. But do you know what insurers mainly look at to assess risk? Whether you smoke or not!
What to tell your loved ones about your life insurance
Paula MacMillan is a Sun Life Financial advisor in Winnipeg. “The dangers of smoking to your health are well known,” she points out. So what happens when an insurer assesses your application for life insurance? “It wants to know, among other things, if you have smoked cigarettes, used tobacco products or used smoking cessation products in the past year.” Underwriting is the process by which an insurer assesses your level of risk. It allows you to calculate the cover to which you are entitled. So you pay a premium based on your level of risk.
In other words, your level of risk determines your premium. “Smokers have a higher risk of smoking-related diseases,” explains the counsellor. Their premium is therefore higher.
How much more does smokers’ life insurance cost?
Smoking is expensive. But how much higher are life insurance costs really for smokers? “A lot of people I’ve worked with have been surprised that compared to premiums for non-smokers, life insurance premiums for smokers can be very high,” says MacMillan.
Take the example of a 30-year-old non-smoker. This man is asking for term life insurance for 20 years and $700,000. He could have a premium of $50.13 per month. But if he were a smoker, his compensation would be $98.01 per month instead. What if he started smoking before the renewal of his contract? He should expect to pay a lot more than if he had remained a non-smoker.
In her experience, Paula MacMillan thinks it makes sense to show smokers what their bonus would be if they quit. “Knowing how much they could save gives them all the more reason to quit.”
How much life insurance do you need to protect your loved ones? Try our life insurance calculator.
Who is considered a smoker?
Most insurers consider smokers to be people who regularly use tobacco or nicotine in any form, which includes:
Cigarettes, cigars and cigarillos
Chewing tobacco
Smoking cessation products, such as nicotine patches and gum
Does vaping affect your life insurance?
Insurance claims do not necessarily address vaping. But many require medical tests, which can detect nicotine in the blood or urine, regardless of consumption mode. So, if you vape, you could be considered a smoker.
Does cannabis use influence life insurance?
What about occasional cannabis users who do not combine it with tobacco? “They could be in the non-smoker category for life insurance,” Ms MacMillan replies.
What about those who use cannabis regularly or daily? “They are likely to pay more.”
Does your workplace benefits plan cover medical cannabis?
What happens when a smoker applies for life insurance online?
“As the online application does not distinguish between smokers and non-smokers, the premiums are generally weighted,” continues the adviser. In other words, the premium will be between that of smokers and that of non-smokers, even for people who do not smoke.
What if you quit smoking?
Want to crush? You will see your health and finances improve dramatically in less than a year by quitting smoking. On the life insurance side, you may be entitled to non-smoker rates. You should :
Sign a declaration indicating that you have not smoked or consumed nicotine in the last 12 months. This includes cigarettes, cigars, chewing tobacco, and nicotine patches or gum.
