We all know smoking is bad for you, but it’s never more obvious than when you look at just how expensive it is for smokers to obtain life insurance – twice as expensive as for non-smokers. It reflects the fact that insurers know smokers are almost guaranteed to pass away sooner because of their vices. But life insurance for smokers is just as important as for non-smokers, because it cushions financial hardship for the family if needed.
According to xLife’s membership data, 92.3% of life insurance policies taken out in 2012-13 were for non-smokers, with just 7.7% being life insurance for smokers (xLife, 2013). We know from the Australian Bureau of Statistics (ABS) 2014-15 data that 14.5% of adults over 18 years are smokers (16.9% of men and 12.1% of women). So as the numbers of smokers are thankfully decreasing, the rates of life insurance for smokers should really be increasing.
Is life insurance for smokers too expensive?
One factor that has undoubtedly influenced smokers’ purchasing decisions could be the cost of life insurance for smokers. Premiums can be up to double that of non-smokers – and it’s worth noting that insurers will generally consider you as being a smoker if you’ve had even one cigarette in the 12 months before your insurance application.
However, CEO of xLife, Russell Cain, does not believe price is necessarily the sole driving factor when it comes to the low rate of uptake of cover from smokers.
“Non-smokers are generally more health-conscious than their smoking counterparts, despite the obvious health risks of smoking,” Mr Cain said.
“We believe this, combined with an ‘everything is going to be alright’ attitude of smokers when it comes to their health, has led to the differences in uptake between the two groups, rather than price being the sole factor.”
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Mr Cain also stressed that if price was a motivator, you could potentially halve your insurance premiums by quitting smoking for at least 12 months. As well as a reduction of life insurance premiums, the decision to quit smoking could also potentially add more than $200,000 to your retirement nest egg.
Why smoking and life insurance should not be mutually exclusive
Despite the higher premiums for smokers, Mr Cain said smokers should still seek out cover, specifically due to the higher health risks caused by smoking.
“Smokers typically have shorter life expectancies than non-smokers, and may have other health-related issues,” said Mr Cain. “By not taking out cover, they are potentially placing themselves and their families at financial risk.”
“They should still speak to a financial adviser about taking out cover because they may find it’s not as expensive as they think.”