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Smokers and Life Insurance: Do You Have Enough Coverage?

Oct. 30, 2014
3 mins
Professional man with blue tie stands outside his downtown office space and looks at his mobile phone

Considering the number of smoking-related deaths annually, one would think smokers would be wise to take out sufficient life insurance – but many don’t, causing potential financial problems for their families,  according to research from UK-based

The gap between the amounts of life insurance coverage taken out by smokers compared to non-smokers means that those who light up regularly are at higher risk of leaving their loved ones exposed to financial hardship – should the worst happen.

Currently, 30% of the UK population admit to being smokers, with one in five (20%) classifying themselves as regular smokers – and the Canadian numbers are eerily similar.

According to the most recent Stats Canada data, 5.8 million Canadians smoke – roughly 20% of the population.

Many Regular Smokers Are Under-Insured

However, with only two-thirds of Canadian households having any life insurance at all, it’s clear that many regular smokers are likely under-insured – a worrying statistic.

At least 19% of all deaths among Canadians are related to smoking, according to recent estimates. It’s a sobering reality, but smokers are more likely to have ongoing health problems and have a shorter lifespan than non-smokers, making them more of an insurance risk.

And their premiums reflect this – on average, smokers pay as much as 40% more for life insurance – forcing many to cut back on coverage as a result.

There’s little wiggle room when it comes to determining just who is a smoker. Most insurers don’t care whether you smoke one cigarette or two packs a day – you’re still a smoker. Some also don’t make a distinction between smoking cigarettes, cigars or a pipe.

E-cigarettes No Solution Either

Could someone who uses e-cigarettes be considered a non-smoker and receive lower insurance rates as a result? No, say insurers. In fact, they argue, there’s a strong possibility that those employing e-cigarettes – with or without nicotine – might revert back to tobacco cigarettes anyway.

Generally, insurance companies take people at their word, which may tempt some potential buyers to claim falsely that they’ve given up smoking. However, lying about whether or not you smoke to try and lower your premiums could be a costly error.

If in the event of your death, the insurer were to discover that you were a smoker when you applied, your beneficiaries would be out of luck. What’s more, you’d have paid all those premiums for nothing.

Quitting Smoking Can Pay Off

With insurance fraud on the rise, life insurance companies are growing a bit more cautious when it comes to underwriting. Smokers who claim they’ve kicked the habit might face a urine test to see if they’re lying, for instance. At the moment, however, such tests are more likely to be administered when insurers are already demanding a medical exam.

There is good news for smokers looking to quit, however. If you were to take out a policy now and then subsequently break the habit, you could then request to have it changed to a non-smoker policy.

Some insurers will even meet you halfway, offering incentives to stop smoking when you take out a policy. Were you to quit smoking for 12 consecutive months within the first two policy years, for instance, some companies will offer you the lower non-smoker rate you would have otherwise qualified for when the policy was issued.

Would you quit smoking if it meant receiving lower life insurance premiums? Tell us in a comment.

Gordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a consulting firm focusing on retirement readiness. Gordon was a columnist for the Globe & Mail and Morningstar for many years and is also currently a columnist for Investment Executive, Canada’s national newspaper for financial advisors.

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