Tobacco use including smoking has been linked to various health problems and an elevated risk of life threatening diseases including cardiovascular disease, lung cancer, throat cancer, etc. This higher risk of life-threatening diseases is the primary reasons why tobacco users including smokers are charged a higher premium for life insurance plans compared to non-smokers with a similar profile.
In spite of such higher premiums, smokers are eligible to purchase term insurance policy in order to protect their family’s financial future. Let’s take a closer look at how term insurance for smokers and other tobacco users work. ...Read More
Written by
Kriti Arora
Insurance Writer
Kriti is a content marketing and branding expert with more than 13 years of rich experience across BFSI and Telecom industries. She is currently leading Digital Creative Strategy for Axis Max Life Insurance.
Reviewed by
Vaibhav Kumar
Insurance Expert
With over 15 years in life insurance, Vaibhav is a recognized products and digital leader for driving innovation at Axis Max Life. He's played a pivotal role in developing new business lines and implementing successful D2C strategies.
Currently there is no separate term plan for smokers in India. So, tobacco user including smokers are offered the same term plan as non-smokers, but have to pay a higher premium for it compared to non-smokers with a similar profile. As long as the premiums for the policy are paid, life cover benefits are available to life insured during the policy term.
In the event of the life insured person’s demise during the policy term, the sum assured is paid out to the policy beneficiary. However, if the life insured outlives the policy term despite being a smoker, no maturity benefits are available similar to any other pure risk term plan. As you can see, there is no real difference between how term insurance for smokers works versus non-smokers. The only difference is the higher premium charged by the insurer due to the perceived additional risk of providing insurance to a smoker versus a non-smoker.
In view of the higher premiums, some smokers and/or tobacco users might be inclined to not disclose their habit at the time of applying for a term plan. This is not a good idea as it can lead to rejection of the term policy application and even denial of claim by the nominee after demise of the life-insured.
While term insurance plans have emerged as an essential part of overall financial strategy for individuals from different walks of life, there are different reasons why a term insurance plan for smokers. Smokers are at a higher risk of getting heart disease, lung cancer, and respiratory issues, so a term plan is essential to ensure that their loved ones are cared for in the event of their death. Depending upon the choice of the policyholder, the sum assured payout from such term plans can be obtained as a lump sum, monthly income or a combination of both.
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The eligibility criteria for a term plan is typically unaffected by the smoking habit of the applicant. So, the generic eligibility criteria to purchase a term insurance plan for smokers include:
Additionally, a medical test is usually mandatory in such cases to determine the current health of the applicant. The results of these medical tests can have significant impact on not just rejection/acceptance of the application, but also the premium payable for the term policy. Insurers also consider additional criteria such as income, submission of requisite KYC documentation, etc. as per their internal guidelines.
The below table illustrates the key features of a term plan for smokers:
| Feature | Description |
|---|---|
| High Life Cover | A high life cover is offered, however premiums for smokers are less affordable as compared to non-smokers of similar profile. |
| Rider Options | Option to enhance protection of the base plan with riders and add-ons for critical illness, accidental death, partial/complete disability by paying an additional premium. |
| Multiple Premium Payment Options | Choice to choose monthly, quarterly, semi-annual or annual payment options. Additionally, option to customise premium payment term such as regular pay, pay till 60 years, pay for 5 years, etc. |
| Flexible Payout | Choice between different payout options such as lump sum, regular income or a combination of both |
| Tax Benefits | Current tax rules stipulate that premiums paid to keep a term plan for smokers in effect are eligible for tax deduction benefits under Sections 80C, if the policyholder has opted for the old tax regime. No such benefit is applicable under the new tax regime. |
| Tax Exempt Payout | The sum assured payout from a term plan for smokers is tax exempt u/s 10(10D) of the Income Tax Act. |
The above features are illustrative and not exhaustive to get further details regarding a term plan for smokers do check the policy prospectus document of different life insurers offering these plans.
The higher risk associated with fatal diseases ranging from cardiovascular and respiratory diseases to various cancers makes term life insurance policies more expensive for smoker compared to non-smokers who have an otherwise comparable profile. This is because, to offset the higher risk of insuring smokers versus non-smokers, a higher premium is charged by the insurer. Additionally, factors such as age of the applicant and current health condition also play a role in determining the final premium amount charged for a term plan offered to a tobacco user including smokers.
If the omission of smoking habit is discovered at the time of application, typically the insurer would either reject the application outright or in a minority of cases, offer a plan with higher premiums similar to ones offered to smokers of comparable profile.
If the omission is discovered by the insurer later on, denial of claims can occur or a reduced sum assured payout may be offered to the claimant. So disclosure of tobacco usage/smoking habit at the time of application is essential for availing the desired protection benefits of the term plan.
Non-smokers are charged lower premiums. Once you stop smoking for a specified period usually at least for 12 months prior to submission of application, you may qualify for the non-smoker rate. Do keep in mind, that the final decision regarding this lies with the insurer.
Compare term insurance policies offered by different insurers and obtain quotes, before finalising your choice.
Longer policy terms can result in lower individual premiums per year. However, this can translate to a higher actual premium payment over time compared to a shorter tenure as you would pay premiums for a longer duration.
Annual payment of the premium instead of monthly payments lead to cost-savings. As many insurers typically charge a higher annual premium in case you are making monthly payments versus a single annual payment for the same plan
The enhanced protection of riders and add-ons typically requires payment of an additional premium. Only select the most relevant add-ons/riders to maximise protection while controlling the total premium payable.
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