Smoking an expensive habit

Cost of life insurance premiums potentially double  – if you’re a smoker!

As all smokers know, their habit is expensive. With a packet of 25 cigarettes tipped to cost around $40 by 2020, the addiction is already a big drain on finances. On World No Tobacco Day the bad news for smokers is that their habit significantly increases the cost of their life insurance as well.

“The rules around smoking are very strict when it comes to personal insurance,” said Canstar Wealth Manager, Paul O’Connor.

“Most personal insurance policies will ask whether you have smoked at all within the last twelve months. Even if you smoke just one or two cigarettes now and then – or if you use a nicotine patch or have an occasional cigar – it can cost you hundreds of dollars each year in additional insurance premium cost.”

So what’s the cost?

Based on the cost of $500,000 of life insurance, has calculated the average monthly premium for both males and females, smokers and non-smokers, as follows:

Average Monthly Premiums – for Males

20 – 29 30 – 39 40 – 49 50 -55 Late Fifties
Non-Smoker $51 $49 $83 $169 $310
Smoker $83 $90 $170 $342 $600
Difference 63.44% 82.37% 103.67% 102.55% 93.10%
Figures based on $500,000 sum insured amount, policies assessed by Canstar in 2016 for Direct Life star ratings

Average Monthly Premiums – for Females

20 – 29 30 – 39 40 – 49 50 -55 Late Fifties
Non-Smoker $35 $39 $70 $130 $214
Smoker $54 $63 $127 $233 $376
Difference 56.02% 62.79% 81.92% 79.34% 75.30%
Figures based on $500,000 sum insured amount, policies assessed by Canstar in 2016 for Direct Life star ratings

“Obviously that type of cost is going to be uneconomic for some people, particularly as they age, which can result in a lack of insurance right at the life stage when they need it,” said Mr O’Connor.

Cost of income protection

The cost of income protection is also significantly higher for smokers.

Based on a monthly benefit of $6,250, for a 42 year old, average premiums between smokers and on-smokers can vary as follows:

Average Monthly Premiums – for Males

Clerk Accountant Chef Truck Driver Nurse
Non-Smoker $109 $103 $153 $176 $146
Smoker $141 $132 $198 $227 $188
Figures based on $6,250  per month sum insured & products on Canstar database

Average Monthly Premiums – for Females

Clerk Accountant Chef Truck Driver Nurse
Non-Smoker $160 $150 $219 $232 $209
Smoker $207 $194 $284 $298 $268
Figures based on $6,250  per month sum insured & products on Canstar database

“Quitting smoking isn’t easy – but if you need a greater financial incentive than just the cost of tobacco (which is a pretty sharp incentive in itself) then think about the amount that you could potentially save on other costs, such as personal insurance,” said Mr O’Connor.

“And as a bit of a wake-up call, keep in mind that the cost of life insurances and income protection isn’t greater for smokers for no reason – smokers pay a higher premium because they have a higher risk of claiming. When it comes to life insurance in particular, that’s a pretty uncomfortable thought!”

For further information:

Justine Davies

Editor in Chief

Ph. (07) 3837 4151 / 0400 127 733

Canstar provides Australia’s interactive online research service in consumer and business finance. Founded in 1992, Canstar Pty Limited is Australia’s researcher of retail finance information for over 250 institutions such as Banks, Building Societies, Credit Unions, Finance Companies, Brokers, Mortgage Originators, Life Companies and finance related Internet Portals. Canstar customers use the extensive database for competitor analysis as well as a means of disseminating their product range. Canstar also distributes this information to print and electronic media for publication and to Agents, Accountants, Brokers and Internet Portals for use in advising their clients.

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