Individuals who fulfil the eligibility criteria specified under the policy can buy Term Insurance Plans. Even smokers can opt for a term insurance policy to protect against the financial risk of premature demise. Term insurance for smokers is offered by most insurance companies but there are a few aspects of the coverage that you should know about. Let’s understand.
Who Is Considered a Smoker?
In life insurance underwriting, there are different categories of smokers based on which the premium is determined. These categories are as follows1 –
1. Table-rated smokers
Table-rated smokers are chain smokers or individuals who have regular and high-frequency smoking habits. Such individuals usually have health-related issues due to their smoking habits and are charged the highest premiums given the high mortality risk.
2. Typical smokers
Typical smokers are also regular smokers but their frequency might be lower than table-rated smokers. Moreover, they have low or negligible health issues due to their smoking habits. As such, their premiums are lower than table-rated smokers.
3. Preferred smokers
Preferred smokers are classified as those who smoke, however have no health issues due to their smoking habits. These types of smokers are charged lower premiums compared to typical and table-rated smokers. However, the premiums are higher than for non-smokers.
Why Smokers may consider Availing Term Insurance?
Term life insurance for smokers is recommended because of the benefits that the policy can provide. Some of the benefits of term insurance plans, that can be availed by smokers too, are as follows –
1. Life coverage
A term plan provides insurance protection against premature demise and provides life cover. This safeguards the financial loss that the family can suffer if the individual passes away. Thus, term insurance for smokers offers financial security with the coverage that the plans provide.
2. Tax benefits
Let’s not forget the tax benefits that term plans offer. Smokers can reduce their tax liability on the premium paid for term insurance plans. The premium is allowed as a deduction under Section 80C up to a limit of Rs.1.5 lakhs2. Premiums up to 10% of the capital sum assured qualify for deduction if the policy is issued on or after 1st April 20122. If the policy is issued before this date, premiums up to 20% of the capital sum assured qualify for deduction2. For individuals suffering from a disease or disability specified under Section 80DDB or Section 80U, premiums up to 15% of the capital sum assured to qualify for a deduction if the policy is bought on or after 1st April 20132.This benefit of Tax is available only under old regime of Tax.
3. Add on Riders
Just like non-smokers, smokers too can add additional coverage to their term plan in the form of riders at a nominal premium. Some of the commonly available riders under term plans are critical illness rider, accidental death benefit rider, waiver of premium rider, etc.
Considerations Before Buying Term Insurance for Smokers
When buying term life insurance for smokers, it is better to keep the following aspects in mind –
1. Premium rate
Smokers are charged a higher premium compared to non-smokers3. Thus, check the affordability of the premium when buying the policy. Ensure that the premium is affordable so that you can pay it over the chosen tenure to enjoy complete coverage under the policy.
2. Sum assured
Usually, there is high sum assured levels under term insurance plans. However, if smoking has resulted in serious medical issues, the insurance company might restrict the maximum sum assured. So, check if there are any sum assured restrictions or not.
3. Coverage restrictions
This might also be applicable if the individual is considered a table-rated smoker and suffers from medical complications due to smoking habits. In such cases, the insurance company might not allow coverage for death due to existing medical complications resulting from smoking. So, check for any coverage restrictions and try and buy a plan which does not have such restrictions.
4. Pre-entrance health check-ups
Smokers might have to undergo pre-entrance health check-ups to determine the existence of medical conditions due to smoking habits.
Modifying Your Policy for Smoking Habits
Your smoking habits might change after buying the policy. Let’s understand how it affects your premiums –
1. Starting smoking after buying the policy
If you start smoking after buying the policy, there would be no effect on the premium. The premium is determined based on your lifestyle habits and medical conditions at the time of buying the policy. Developing habits later on have no effect on the premium4. However, if the policy lapses and you revive it, the insurance company might conduct a medical examination or you might have to submit a declaration of good health. In such cases, if you develop a smoking habit later on, it might affect your premium.
2. Stopping smoking after buying the policy
If you stop smoking after buying the policy, the premium will not be affected immediately. However, after a few years of not smoking, you can inform the insurer of your changed habits and the insurer might offer lower premiums4.
Conclusion
If you are a smoker, don’t shy away from a term insurance plan. Your family would get the financial assistance in your absence and you can also enjoy peace of mind from the life coverage that the policy provides. Moreover, the tax saving adds to the benefits of term insurance for smokers and makes the policy a wise choice.
FAQs
1. Does smoking affect the cost of term insurance premiums?
Yes, smoking affects the cost of term insurance premiums. Smokers are charged higher premiums compared to non-smokers3.
2. Are there different term insurance policies for smokers?
No, there are no different term insurance policies for smokers. Smokers can also buy the basic term plans offered by insurance companies but at a higher premium rate.
3. Are there any benefits of quitting smoking in term insurance?
If you quit smoking, you can get healthy. At the time of buying a term insurance policy, the absence of a smoking habit would help in saving premiums.
Reference
1. https://timesofindia.indiatimes.com/readersblog/riyable/health-insurance-for-smokers-19467/
2. https://incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf
3. https://www.insuranceinstituteofindia.com/downloads/IC38/ALEnglish.pdf (Page 279)
4. https://www.forbes.com/advisor/life-insurance/smokers/
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