Is any Change in Smoking Status Permitted in Term Insurance?

Written by : Knowledge Centre Team

2021-10-07

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Generally, smokers pay higher life insurance premiums than non-smokers. This is because smokers are at a higher risk for developing health problems, and as a result, are more likely to die at a younger age than non-smokers. But what if you start smoking after purchasing a term insurance policy?

What if you Start Smoking After Buying Term Insurance?

If you already have a term insurance plan and become a smoker sometime later, you do not have to necessarily inform your insurer. However, it is always best to be upright and honest to avoid issues later.

For example, if you do not inform the insurance company that you have started smoking, it may seem like you are defrauding the insurance company. The claim process may get prolonged until the company completes due diligence and verification. The delay can be mentally and financially taxing for your family.

If you inform the insurance company, you may be allowed to continue with your policy with perhaps an increase in your premium. The increase in premium is not a given and may depend on case to case.

Insurance companies categorize smokers for ascertaining additional premiums:

Preferred Smoker

If you smoke but are otherwise fit and do not have any other health issues, the premiums you pay may be at par with those of non-smokers.

Typical Smoker

If you have minor health issues, you are considered a typical smoker. You may have to pay a higher premium than those paid by preferred smokers.

Table-rated Smoker

If you have more obvious health problems, the insurance company will charge you a much higher premium to offset the risk.

If you start smoking after buying term insurance, you may be able to get a rider added to your policy that covers the increased risk. However, this will likely come at an increased premium.

What if you Start Drinking after Buying Term Insurance?

If you start drinking alcohol after you purchase a term life insurance policy, it generally will not affect your coverage. Some possible outcomes when you inform the insurance company about your newfound habit:

Consumption of alcohol within globally prescribed standards may not affect your policy, coverage, or premium.
In the worst-case scenario, your insurer may ask you to undergo a medical examination.
If you are otherwise found to be fit, the coverage will continue, uninterrupted.
However, if you develop a drinking problem after you buy the policy, that could affect your coverage. If you develop alcohol dependence, your life insurance policy could be cancelled.

How Smoking and Drinking Habits Impact your Term Insurance?

Smoking and drinking can affect the benefits of a term life insurance policy in a few ways:

First, smokers and drinkers typically pay higher premiums than non-smokers and non-drinkers. This is because they are at higher risk of developing dangerous health problems.
Second, some insurers may exclude coverage for certain conditions that are related to smoking or drinking, such as cancer or liver disease.
Finally, the death benefit of a policy may be reduced if the policyholder dies because of smoking or drinking.

Declaring Habits While Buying a Term Plan

Your health is one of the most important factors when calculating the premium of a term plan. Your health is the best predictor of your normal longevity. Thus, you must declare all your health issues, habits, and lifestyle choices accurately while buying an online term plan.

While buying a term plan, you need to be honest about your lifestyle habits. In life insurance, utmost good faith is a duty that both the insured and the insurer owe to each other. It is a duty of honesty and full disclosure. This duty requires that both parties disclose all material information about the risk being insured. The insurer will primarily ask about the following key habits that impact the policy offerings:

Smoking and
Drinking

These habits are risky for your health and affect your life expectancy. If you are a smoker or drinker, you will be charged higher premiums.

Here are 14 reasons you might be paying higher premiums.

Insurance contract is based on the doctrine of utmost good faith, unlike a business contract which is usually, ‘buyer beware’. That means the proposer needs to declare all the relevant information to the insurer, including health issues, smoking, drinking habits, and occupation.

Not declaring a smoking habit or a lifestyle disease like hypertension or diabetes while buying a term plan can have serious repercussions. The insurer may either:

Reject your claim or
Reduce the sum assured if it comes to light during a claim

The reason for such an action is simple. There is an inherent moral hazard in some of these unhealthy habits. A moral hazard is the increased likelihood of risky behaviour when individuals are insured against the consequences of that behaviour.

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Most companies will allow a change in smoking status for term life insurance, although there may be some limitations. For instance, some companies may only allow a change from smoker to non-smoker, while others may allow a change from non-smoker to smoker. Additionally, some companies may require evidence in the form of a fresh health check-up to arrive at an appropriate premium. Disclosing your smoking status, whenever you start smoking is the best thing to do so that you are assured that the company will continue offering you a life insurance cover.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.