I always assumed that life insurance for tobacco users was more expensive than those that don't use it, but I never realized how much more.
A younger client of mine in their 30's was interested in purchasing term life insurance and what I didn't know is that he used chewing tobacco.
Once I found that out, I warned him that the potential cost could be more – which ended up being WAY much more.
In his case, his premium more than doubled. I was astonished.
That prompted me to do a little experiment the other day. I wanted to see how using tobacco affects your coverage premiums for life insurance – for males and females.
In some ways, I wasn’t surprised at what I discovered, based on what I discovered with my previous client. What I was astonished was the percentage increase.
Term Life Insurance for the Average Joe or the Average Jane
Just to set the stage, let’s talk about Term Life Insurance for a moment. Wikipedia defines it as:
“Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis.”
In plain English, it’s a form of life insurance that covers a specific term, or period of time. If the insured person passes away during this term, the death benefit is paid to the beneficiary. In contrast, things like Whole Life Insurance cover an individual for his or her entire life.
Term life is a solid fit for many people, and being the original kind of life insurance, it’s what many people are used to.
Why Being a Tobacco User will Kill More Than Your Lungs
That’s right – it will also kill you with insurance premiums.
It’s no secret that health and life insurance premiums are higher for smokers. And when you think about it from the insurance company’s point of view, it makes a lot of sense. Smokers are way, way more likely to have health issues. On top of all the issues that smoking itself creates, smokers are more likely to have poor diets, exercise less, and suffer from many illnesses and diseases related to their inactive lifestyle. To an insurance agency, a smoker is one of the highest risk people. This is so much so that even the smalleet smokers life insurance policies are significantly higher than their non-smoker counterparts.
What Would You Guess The Difference Is?
Take a crack at it. What do you think the cost difference is for someone to get term life insurance who’s not a smoker, versus the cost of term life insurance for a smoker? Twice as much? Three times?
Try almost four times as much!
I ran term life quotes for a male and female at 30 year term $250,000 preferred non-tobacco and preferred tobacco. In some of those numbers I ran the other day, I found differences up the 3.8 times as high for smokers life insurance versus non-smokers.
Check out these numbers for insurance premiums for 20 year term million dollar life insurance policies of tobacco users vs. non-users:
- 30 Year Old, Male Non-Smoker: $405
- 30 Year Old, Male Smoker: $1480
- Percent Difference: 265% more expensive for the smoker
- 30 Year Old, Female Non-Smoker: $340
- 30 Year Old, Female Smoker: $1030
- Percent Difference: 202% more expensive for the smoker
- 40 Year Old, Male Non-Smoker: $604
- 40 Year Old, Male Smoker: $2890
- Percent Difference: 378% more expensive for the smoker (this is the highest difference)
- 40 Year Old, Female Non-Smoker: $509
- 40 Year Old, Female Smoker: $2155
- Percent Difference: 323% more expensive for the smoker
Here are some numbers for a 20 year term at $250,000 for a 40 year old
I ran these numbers since I figured a 40 year old probably wouldn't want to have a life insurance premium payment until they were 70 years old.
- 40 Year Old, Male Non-Smoker: $230
- 40 Year Old, Male Smoker: $852
- Percent Difference: 370% more expensive for the smoker
- 40 Year Old, Female Non-Smoker: $200
- 40 Year Old, Female Smoker: $690
- Percent Difference: 345% more expensive for the smoker
These numbers are just to be used as examples. Please consult an insurance professional to see what type of insurance would be best suited for you.
Tobacco Use Affects All Kind of Life Insurance
Don't just think that smoking or using chewing tobacco will just affect your term life insurance premiums. I also had another case where an older client was looking to use their built up cash value in their whole policy to buy a paid up permanent policy. The initial interview seemed like he was a good candidate for the process. That is, until the client had a bit of a brain lapse. The client who doesn't typically use tobacco, decided to have some chewing tobacco while he drove his tractor on his little farm. It might not have been a big deal, except for the fact, it was 3 days before his medical exam! Needless to say, in this situation, even top rated life insurance companies will come back with that he had tobacco in his system and it ruined the chances of us moving forward.
Moral Of The Story
What am I getting at here? Exactly this: if you want to be a Soldier of Finance like me, quit smoking or using chewing tobacco.
Next time you buy a pack of cigarettes for about $10.00 and think “These things are expensive” remember these numbers. And realize that those cigarettes are costing you way more in insurance premiums than they cost you at the store.