Home / Insurance / News /  Why smokers pay high premium for term insurance

If you wonder why smokers pay a high premium than non-smokers even with low-risk job profiles such as construction workers, coal miners and prison officers, then here is what you should know.

Life insurance premium is often calculated considering the job profile of the policy seeker, said Santosh Agarwal, CBO- Life Insurance, While life insurance premium for people with high-risk job profiles is quite high, those with low-risk job profiles like bankers and software engineers pay a lower premium for a life insurance policy.

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By splitting each industry into smokers and non-smokers to assess their respective premiums, the data revealed that a smoker in a relatively low-risk job profile industry will still be paying significantly more each month for life insurance than a non-smoker in a high-risk job profile.

“An important reason why smoking has a much bigger impact on the life insurance premiums than most job profiles are proven detrimental effect of smoking on people’s health. While even the highest risk job profiles are still very unlikely to result in death, smoking is the primary reason for a plethora of life-threatening diseases. Smoking tobacco for long has been associated with rising incidents of life-threatening diseases like lung cancer, tuberculosis, heart ailments, strokes, bronchitis, infertility, and peptic ulcer," Agarwal added.

Health hazards of smoking

Life insurance premiums depend on mortality tables for different groups of the customer population. These statistics determine the risk that an insurance company carries while providing term cover for the population.

Dhirendra Mahyavanshi, Co-Founder, Turtlemint said that the term insurance policy covers the risk of untimely death. The premium of the policy is, therefore, governed by the insured’s mortality risk, i.e. the risk of death. Now, if the mortality risk is high, the premium would be high and vice-versa. “Smoking is a health hazard that increases the risk of ailments. This, in turn, increases the mortality risk for smokers. Thus, smokers are charged a higher premium because they have a higher mortality risk compared to non-smokers. While the premiums are higher for smokers, non-smokers can enjoy a premium discount. Even if you smoke occasionally, you will be considered a “smoker" in the insurance parlance and you would have to pay a higher premium," said Mahyavanshi.

Normally, for a smoker, the mortality rates tend to be higher leading to a higher risk for the insurance company.

Echoing a similar view, Casparus Kromhout, MD & CEO, Shriram Life Insurance also said, "The possibility of a claim arising from customers that smoke is more than for non-smokers. “Thus, insurers provide risk cover to these customers at an extra charge to factor in the additional risk."

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