Quitting smoking doesn't ensure immediate reduction in premium

Life insurers need applicants to abstain from tobacco for up to five years. However, health insurance firms don't differentiate that much

When buying an online term insurance plan, Janmejay Singh (35) was asked if he consumes tobacco in any form. Singh, who had quit smoking eight months ago, selected the ‘non-smoker’ option. On payment, the company asked him to go for a health check for his Rs 50-lakh policy. When the reports were out, the life insurer told him he would need to pay extra premium, as the tests showed he consumes tobacco.

Life insurance companies need an individual to abstain from smoking for an extended period to classify as a non-smoker. Only then will the premium be reduced. An Aegon Life Insurance spokesperson says the company requires a five-year period of abstinence. Pawan Mahajan, head of underwriting at Bajaj Allianz Life Insurance, says the company follows the same tenure. Niraj Shah, director - marketing, strategy & products at PNB MetLife, says the company has a lower period.

The difference in premium between a smoker and non-smoker varies widely. For Bajaj Life, it is between five per cent and 25 per cent; for Aegon Life Insurance, it can be between 30 per cent and 50 per cent and for PNB MetLife, it is 20-25 per cent.

If you have kicked the cigarette butt and occasionally use an alternative such as nicotine patch or chewing gum or e-cigarettes to satisfy the urge and not relapse, you have ruined your chances of getting a non-smoker premium for a life insurance plan. Insurers will consider you as a smoker if you have used these alternatives, says Mahajan. Smoking occasionally, too, will mean you will need to shell out higher premiums.

If you are wondering how these companies will know about your tobacco consumption, they don’t issue policies beyond a certain sum insured without a medical test. Also, if you are over 45 years, a health check is mandatory. Online term plans are not sold entirely over the internet. Most life insurance companies require applicants to undergo medical test if they are buying an online term plan with sum insured above Rs 25 lakh. After you fill the form and pay the premium, the company will send you an e-mail to undergo tests. Depending on the results, the premium remains the same or a loading is levied.

To know an individual’s smoking status, he has to take the cotinine test, says the Aegon Life Insurance spokesperson. The results of these, too, differ according to insurers. While some say the traces of tobacco usage can be found for up to three years or more, some say they can take a call if the person has stopped using tobacco for a year or more.

If a person, who has stopped tobacco usage, is not aware of an insurance company’s parameters and mentions he doesn’t use it; it is not necessary that your application will get rejected. Insurers say depending on the test results, they go back to the applicant and ask him to pay extra premium. “We believe the person won’t fill up wrong information unless he is not aware of it. Applications are, therefore, not rejected,” says Shah.

While life insurers consider smoking to levy extra loading on the premium, health insurance companies do not differentiate much between a smoker and a non-smoker for premiums. “We check the overall health of the person before deciding on the loading,” says M Ravichandran, president – insurance at Tata AIG General Insurance. Unless the person is opting for a high-value product, the rate may be the same for a smoker and non-smoker.

Suresh Sugathan, head of health insurance at Bajaj Allianz General Insurance, says the company levies an extra five per cent over and above the base premium for smokers.

Amit Bhandari, head – health and agricultural insurance, claims & underwriting at ICICI Lombard General Insurance, says while the company asks for details about smoking and alcohol consumption, it is only done to create a database. Once they can scientifically say claims from smokers are higher, they might ask for extra premium.