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  • How does tobacco affect a life insurance premium?
  • August 1, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA 

    In any event or situation, the usage of tobacco will increase your premium; the only question is by how much.

    Every life insurance company treats the different forms of tobacco – cigarettes, cigars, and chewing tobacco – in their own fashion, which is why companies will ask you very specific questions during the application process.

    For example, “Have you used any tobacco products in the past 12 months?” or “When was the last time you used any tobacco products?”

    Insurance companies will use this information to determine if you are a smoker or not. If you are labeled as a smoker, the next step is to determine which smoker risk category you will be placed in.

    Rate classification for tobacco usage depends on the type of tobacco being used and for how long. Generally speaking, insurance companies don’t differentiate between an occasional smoker and a pack-a-day smoker. Essentially, they believe the risk factors are the same and should be rated as such.

    If you have smoked or used any tobacco products during the last 12 months, you will be considered a smoker in the eyes of a life insurance company.

    However, if you a heavy tobacco user, you may have other health related issues (e.g., high blood pressure) because of the tobacco usage. Meaning, you will be placed into a higher risk category and ultimately pay a higher premium than an occasional or non-smoker.

    For non-tobacco classes, it will depend on the date of the last usage of tobacco.

    There is a wide range of how life insurance companies treat those who use tobacco. A couple of considerations are the type of tobacco used and, if no longer using tobacco, the last date of usage.

    Since insurance companies treat tobacco usage in different ways, it is critical to have an adviser who has access to a number of companies who will ultimately find you the best quote.

    Your (higher) insurance premium will depend on a series of factor, which includes the type of tobacco, amount of coverage you want, your heath and your age.

    A special note for cigar smokers is that some companies will consider you a non-smoker if you smoke cigars only occasionally (less than 10 a year – typically) and test negative for nicotine on lab tests.

    If a insurer finds out, at any time, that an insurer misrepresented information regarding tobacco usage, they will rescind the policy as a material misrepresentation. Meaning, they will cancel the policy, thus defeating the entire purpose of obtaining coverage.

    However, if you eventually decide to quit smoking, you can get your rate reduced by getting reclassified. Most insurance companies consider someone a non-smoker who hasn’t used any tobacco products during the last 12 months.

    Some insurance companies will pay the death benefit based on the amount of coverage that the premiums paid would have purchased on a smoker basis; however, the majority do not, as this is not fair to the truthful applicant.

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

Creative Commons License
Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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