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Quit Smoking or Lose Coverage Impact on Your Term Insurance

  2/21/23 8:41 AM

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Did You Know? According to the findings from the 2016–2017 Global Adult Tobacco Survey (GATS) published on January 23, 2023 - India is the world’s second-largest consumer of tobacco products, with about 267 million tobacco smokers. This includes 100 million tobacco smokers among them, and over 199 million people who use smokeless tobacco.

Due to the negative impact that tobacco can have on an individual's life, it's not surprising that insurers consider smokers to be high-risk and offer them separate term plans.

What Happen If You Lied About Being a Smoker?

In the event that you lied about being a smoker and your life insurance company failed to detect nicotine during your health exam, there may be complications when it comes time to file a claim. While the insurance company may argue that they don't have to pay out the claim, in reality, they will, but it will cause problems and delays for your beneficiaries. Furthermore, it opens the door for the company to deny the claim altogether.

Most insurance companies will re-evaluate the policy with the knowledge that you were a smoker, and if they would have issued the policy under those circumstances, they will pay the claim, but they will deduct the difference in higher premiums that would have been charged for a smoker.

If the insurance company discovers the lie while you are still alive, it is technically fraud. You will not be charged or prosecuted, but the company may terminate your policy, or require you to pay smoker rates going forward. If you are a smoker, it is best to be honest and search for the most affordable smoker policy available.

Who is Considered a Smoker?

To determine if you are a smoker, your insurer will ask you three questions when you purchase a term plan online:

1. Do you use nicotine and/or tobacco products?

2. Have you used a tobacco product in the past four years?

3. Have you ever used a tobacco product?

Answering "yes" to any of these questions classifies you as a smoker, and you may be further sub-classified as follows:

  • Preferred Smoker: If you are a smoker but are fit and don't have any other health issues, you may fall under this category. You may be required to pay comparatively lower premiums for term plans.
  • Typical Smoker: Smokers with minor but persistent health issues are classified as typical smokers. They may have to pay a higher premium than preferred smokers.
  • Table-rated Smoker: If you are a smoker with obvious health issues, you may fall into this category. Insurers may charge you a higher premium to offset the additional risk.

What Happens if You Quit Smoking After Purchasing a Life Insurance Plan?

If you quit smoking after purchasing a term insurance policy in India, it may not have an immediate impact on your premium or policy as most insurers do not allow you to change your status from smoking to non-smoking. However, you have two options: you can continue with your plan as is, or after a few years of being tobacco-free, you can re-apply for a new term plan as a non-smoker. It is important to be honest about your smoking habits in the past and accurately state for how long you've been tobacco-free.

If you can qualify as a non-smoker, you may enjoy a benefit on premiums, although since you are older than when you purchased your previous policy, the premium benefit might be negligible or cancelled out. Some insurers may consider reducing your premium if you are tobacco-free, but it will likely still be higher than if you were a non-smoker from the beginning.

It is essential to secure your family's financial future with a term plan, regardless of whether you are a smoker or not. When purchasing a policy, it is crucial to be honest about your lifestyle habits and medical conditions, as your insurer will provide policy terms and conditions based on the information you provide. If they discover that you were knowingly dishonest, they may cancel your policy and even file a complaint of insurance fraud against you. Being truthful is the best way to ensure your family's finances are protected.

 

Swati Tumar - Travel & Finance Writer

Swati is a Writer in the day and an illustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.

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