Wednesday, April 24, 2013

Smoking is Injurious to "Wealth" Say Life Insurers

This is a guest post written by Surabhee Gupta.

Well, you would have heard the age old adage of smoking being injurious to health which is definitely a fact but the habit can also make you lose money not only by making you spend money on cigarettes but also by spending more towards medical expenses.

You might be at ease thinking that you can always buy health insurance to pay for your medical bills just in case there is a need. But the fact of the matter is, given the risk factors associated with smoking, insurance companies charge higher premiums compared to those who don’t smoke. So if you happen to be a smoker and you want to buy an insurance cover, be prepared to out a significantly higher premium.

Why is Insurance Premium Costly for Smokers? 

 It definitely isn’t rocket science to figure out why insurance companies would charge you more if you are a smoker. Life insurance companies segregate policy holders into different categories or risk profiles based on a variety of factors such as age, overall health and lifestyle. The risk profiles may vary from a "preferred category" to "average" and eventually a "nonpreferred" risk category based on the factors mentioned above.

Based on your pre-purchase review, the insurance provider will accordingly allot you a specific risk profile based on which your premium would be decided. And when it comes to smokers, no matter how many cigarettes you smoke, you are more likely to be profiled in the high-risk category which would automatically lead to higher premiums.

For instance, take a look at the "sample" premium rates for smokers versus nonsmokers across an age group of 30 to 45 years for a pure term insurance plan. The difference in premium varies from 13% to over 20% which is significant considering the fact that the rates mentioned below are for term insurance plans which happens to be the cheapest insurance plans.

 If You Are a Smoker – Be Forthright About It

 Now if you happen to be a smoker, you might be toying with the idea of hiding the fact when you purchase insurance. Great idea, but don’t even think of trying it unless you want your policy request to be rejected. And even if you end up buying a policy, you would keep paying for insurance that has a high likelihood of running into claims related issues where the insurance company is entitled to reject your claim. So to put it in simpler terms, it is always advisable to be forthright and disclose about your smoking habits to avoid problems in the future with respect to claims processing.

What Happens If You Start Smoking After You Have Purchased Insurance? 

Now this can be a tricky one but if experts are to be believed, if you start smoking after you had purchased a policy, you don’t need to necessarily disclose the same to the insurance provider. However, if you die due to a smoking related ailment, then the insurance company could take objection during claim settlement.

So what’s the Best Thing to Do to Avoid Any Sort of Confusion? 

Well, the best thing to do obviously is to stop smoking altogether. Insurance providers during the application process ask people to disclose if they smoke or have used any other tobacco product in the last 12 months. If you have indeed used a tobacco product during the specified timeframe, go ahead and declare it. And if you have been a nonsmoker or have abstained from smoking for a really long time, then claims getting rejected due to smoking related ailments should be the least of your worries.

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