Life is uncertain and your sudden absence may create havoc in the financial stability of your family. A life insurance policy is beneficial to ensure your loved ones do not face any liquidity crises due to an unforeseen event.

You may choose a traditional insurance plan or a term plan to procure life coverage. A traditional life insurance policy offers both death and maturity benefits if you survive the duration. In comparison, a term insurance plan pays the policy benefits to your beneficiaries in case of an unfortunate incident during the policy term.

The premium on life insurance plans

The premium on the life cover will depend on whether you opt for a term plan or a regular insurance policy. Additionally, factors like your age, gender, sum assured, and lifestyle affect the premium amount.

One factor that significantly affects the premium is whether you are a smoker or a non-smoker. Most insurance companies charge a higher premium if you smoke regularly because you pose a higher risk as a smoker.

When you quit smoking

A common misconception that you may have about term insurance for smokers is that the premium automatically decreases if you give up this habit. Let’s assume that you quit smoking six months ago and are now planning to buy a term plan. While filling out the proposal form, you check the column for a non-smoker. Most term insurers need you to undergo a medical check-up before they provide you with the policy. Unfortunately, the medical reports show that you are a smoker even if you have quit the habit. Therefore, you would need to pay an extra premium to avail of the coverage.

Life insurers require you to not have smoked for an extended period to ensure that your premium is lower. The period may vary from one insurance company to another and it may probably be as long as five years.

Premium differential

Unfortunately, the premium differential for term insurance for smokers and non-smokers is significant. Again, it varies between insurance companies and may range from as low as 5% to as much as 50% of the total premium cost. In addition to your smoking habit, the insurers will consider your overall health prior to determining the loading on the premium amount.

Occasional use of alternatives

If you use a nicotine patch or e-cigarettes to satisfy your urge to smoke without relapsing, you will still not be classified as a non-smoker. Moreover, if you are an occasional smoker, you may still not benefit from the lower premiums offered to non-smokers. Insurance companies often consider both these cases as smokers and therefore, levy a higher premium due to increased risk.

You may not be aware of the company policies at the time of filling the form. Therefore, the insurer may not reject your application based on the medical test results. The company offers you the option to pay a higher premium to avail of the insurance coverage.