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Understanding life insurance

July 04, 2019

How does smoking affect your life insurance?

Smoking can add a huge price to your health and your life insurance premium. But just how much more is it costing you in the long run? And what happens to your life insurance if you quit?

Have you ever thought of how much impact smoking has on your finances? Health Canada’s cost calculator finds that smoking half a pack a day can cost up to $2,500 per year. Meanwhile, on a nationwide scale, the Canadian Cancer Society reported that smoking generates $6.5 billion in health-care costs yearly. And, the expenses don’t end there – not if you’re looking to get life insurance.

What does life insurance have to do with it? Your life insurance rate depends on how healthy you are right now. But it also depends on whether you’re putting your health at risk with lifestyle choices like smoking. Here’s how this costly habit can affect your life insurance premium.  

How smoking can affect your life insurance premium

To start, let’s look at the basics of life insurance. You buy a policy that provides financial protection and pay for it with monthly or annual fees, called premiums. What happens if you die while the policy is still active? Your beneficiaries get a specific amount of money stated in the policy, known as the death benefit. They can then use that money to help pay off debts, mortgages, loans and other living expenses.

Basically, life insurance can help give your family financial assistance and security after you die. So, how do insurance companies put a price on that security? A lot of the cost of life insurance depends on your current state of health and your family history. But what’s one of the biggest factors insurance companies look at when assessing your health risk? Whether or not you’re a smoker.

Paula MacMillan is a Sun Life Financial advisor in Winnipeg. “The health hazards of smoking and the risks it puts on your life are well-known,” she says. So what happens when an insurance company reviews your life insurance application? “They’ll want to know if, among other things, you’ve been smoking cigarettes or using any tobacco or smoking cessation products in the past year.” Underwriting is when an insurance company reviews your health risks after you’ve applied for life insurance. This process lets an insurer calculate the coverage you’re eligible for. It also ensures your premium reflects the level of risk.

Simply put: Your risk level affects your premium. “Being a smoker puts people at a higher risk of smoking-related illnesses,” Macmillan says.  “And this translates to higher premiums.”

How much more do smokers have to pay for life insurance?

Smoking comes with a price. But exactly how much higher are life insurance rates for smokers? “A lot of people I’ve worked with were surprised to find that compared to non-smoker premiums, life insurance rates can be much more costly for smokers,” MacMillan says.

For instance, let’s take a 30-year-old, non-smoking man with a $700,000, 20-year individual term life insurance policy. He might get quoted a monthly premium of $50.13. But if he turns out be a smoker, his monthly premium could become $98.01. And what happens if he takes up smoking before it’s time to renew his policy? Then he can expect to pay a lot more than if he had remained tobacco-free.

From her experience, MacMillan finds that it helps to show smokers what their non-smoker rates would be. “Just knowing how much they could be saving gives them one more reason to quit,” she says.

Who’s considered a smoker on a life insurance application?

Most insurers would categorize people as smokers if they regularly use tobacco or nicotine in any form. This includes the following products:

  • Cigarettes, cigars and cigarillos
  • Chewing tobacco
  • Smoking cessation products like nicotine gum and patches

Does vaping affect your life insurance?

An application might not ask about vaping. But many applications require medical tests. These tests can detect the nicotine in your blood or urine regardless of how you consume it. So if you vape, you could still be listed as a smoker.

Does cannabis affect your life insurance?

What if you’re a casual cannabis user, who doesn’t combine marijuana with tobacco? “Then you could fall into the non-smoker category for life insurance,” MacMillan explains.

But what if you’re consuming cannabis regularly or more than once a day? “Then it’s likely that you’ll pay a higher rate,” she says.  

What happens when a smoker buys life insurance online?

 “Online coverage can’t distinguish between smokers and non-smokers, so the rates are usually blended,” MacMillan says. In other words, you could pay somewhere between the smoker and non-smoker rates even if you don’t smoke.

What happens to your life insurance premium if you quit smoking?

Ready to butt out? The year you quit smoking, you’ll see a drastic improvement in both your health and your finances. In terms of your life insurance policy, you may be eligible for non-smoker rates if you can:

  • Sign a non-smoking declaration stating that you’ve been a non-smoker for the last 12 months. This means you no longer smoke, consume or use cigarettes, cigars, chewing tobacco, nicotine patches or gum.
  • Have a urine test to prove there’s no trace of nicotine in your system.
  • Confirm that there haven’t been any significant negative changes to your health.

MacMillan finds the last point could pose a problem in certain cases. “Insurers want to know what made you decide to quit,” she says.

What if you choose to quit because you’ve just had a serious health complication and your doctor advised it? “Then they’re not going to categorize you as a non-smoker,” she adds.  

Let’s say you bought a permanent individual life insurance policy as a smoker. But you’ve decided to quit smoking after surviving a heart attack. At this point, your health still puts you in a high-risk category. This means your insurer is unlikely to remove the smoker rating from your policy – even if you quit.

Getting a premium reduction can be difficult if you have other health risks holding you back. But it’s still possible – especially if you quit smoking while you’re still healthy. Bottom line: If you can quit smoking, you can start saving.

If you’re ready to quit smoking, these tips and resources can help you get started:

How to buy life insurance

Ready to seal the deal on your life insurance? In most provinces, you can either purchase life insurance online or through an advisor. But if you live in Quebec, you’ll have to talk to a licensed representative to complete an application.

Usually, when you buy life insurance through an advisor, the policy you’re applying for will be fully underwritten. The underwriting requirements will depend on many factors, including your age and how much insurance you’re looking for. The older you are and the more insurance you’re looking for, the more rigorous the underwriting. Buying guaranteed-issue life insurance online, however, typically requires no health information from you, other than whether you’re a smoker. 

*This article provides general information only.  Sun Life doesn’t give legal, accounting or tax advice to advisors or clients. Before acting on any of the information in this article, seek advice from a qualified professional. For example, talk to an advisor, lawyer or an accountant. Please also keep in mind that the values and rates mentioned here aren’t guaranteed.

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