Why Tobacco Consumption Is Proving Heavy On Our Life Insurance

Why Tobacco Consumption Is Proving Heavy On Our Life Insurance
Nirmala Konjengbam - 15 December 2019

Mumbai, December 15: It is an age-old advice to buy a life insurance policy as early as possible to save up on the premium amount. However, there are other factors as well that could lead to fluctuation in the premium amount and one of those is consumption of tobacco.
The underwriting department of the insurers determine the premium of policies and they calculate this price on the basis of various factors. Insurance premium is determined on the basis of personal information provided at the time of buying a plan.
Factors including age, gender, marital status, habits, family history are few to mention. It is mandatory to fill up all the required details at the time of buying a life insurance plan. One may hide or conceal habits like drinking, smoking or chewing tobacco to enjoy less premium. However, this could lead to cancellation of the policy and whatever benefits available under the policy may not entitle to the policyholder at the time of claim.
Some of the diseases caused by smoking are lung cancer, heart disease, strokes, oropharyngeal cancer, type 2 diabetes, cataracts, esophageal cancer and chronic obstructive pulmonary disease.
And hence, smokers are likely to pay heavy price for their life insurance plan as it increases risk exposure for the policyholder. For instance, a 35-year-old man, a smoker, who buys a term plan with 45 years premium paying term for Rs 1 crore cover will have to pay an annual premium amount Rs 47,400 (without GST) for 45 years, in total Rs 21,33,000. On the other hand, a 35-year-old man, a non-smoker, will have to pay annual premium amount Rs 22,460 (without GST) for 45 years for the same plan, in total just Rs 11,93,400.
In simple words, a non-smoker will pay Rs 9,39,600 less than a tobacco user for the same insurance plan for a same term period and cover. Smokers are paying heavy premium based on their risk factor and insurers are charging high premium based on the risk. This also means that a non-smoker of higher age bracket could get a term plan for lesser premium than a smoker of young age.
Insurance is based on utmost good faith and insurable interest and one must honestly disclose all the facts and personal details at the time of buying. This will avoid disputes at the time of claim. All the insurers want to settle claim at the earliest and in case of suspicious or fraud claims, insurers have the right to reject it. If the insurer finds out that the cause of death was related to smoking or using tobacco, the insurer may reject the death claim and death benefit would not be paid to the beneficiary.
Our habits make a huge difference when it comes to the price of insurance plans and more importantly concealing them at the time of buying insurance plans could lead to bigger issues. However, small habitual changes could lead us on the way to a stress free future.