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What If a Policyholder Starts Smoking After Buying a Term Plan?

When you buy a term insurance plan, you are always asked a question in the proposal form – do you smoke? The answer to this question impacts your term insurance premium simply because of the fact – smoking increases your health risks.

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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Smoking is a bad habit that can cause lung disease, cancer, heart disease, stroke, etc1. Moreover, in many cases, the medical complications arising out of smoking might also lead to death. According to WHO (World Health Organisation) data, smoking causes nearly 1.35 million deaths every year in India2.

So, if you are a smoker, you present a higher risk to the insurance company as compared to a non- smoker.

 

But who is considered a smoker?

 

In insurance parlance, you are considered a smoker if any of the following points are met, regardless of quantity and frequency of consumption–

  • You consume nicotine or tobacco-related products.
  • You have consumed nicotine or tobacco-related products anytime in the past. You are considered a smoker even if you smoke occasionally/rarely. Typically, insurers classify you into the following types of smokers based on your smoking habits3 -

 

● Table-rated smokers

Habitual smokers who exhibit smoking-related health hazards.

● Typical smokers

Habitual smokers have minor health hazards due to their smoking habits.

● Preferred smokers

Smokers do not have any health-related complications due to their smoking habits.

 

Smoking and term insurance

 

When buying a term insurance plan, if you smoke, even restrictedly, you need to disclose your habit. As mentioned earlier, the proposal form always asks whether you smoke or not and you need to give a truthful answer to the question. This is because life insurance contracts are contracts of good faith. The insurer trusts your declarations in the proposal form and if you lie about any fact or hide it, the insurance company may, based on the facts submitted, reject your claim if the hidden information is discovered later.

Insurers may conduct a medical test to identify smokers and the premium amount may vary from smokers to non-smokers.

So, if you smoke, you should inform the insurer of the same.

 

Developing a smoking habit after buying term insurance

 

Term insurance plans are, usually, long-term plans. It might happen that when buying the policy, you did not smoke but later you develop the habit. What should you do? Will smoking impact your coverage?

In life insurance plans, you need to disclose all the material information at the time of buying the policy.

It is better to inform the insurer if the smoking habits, change any time after buying the plan. This will keep you in the clear in case of medical complications brought on by smoking that might cause any eventuality. When you inform the insurer, the insurer might continue the coverage unaffected or might even revise the premium, basis the insurer’s terms and conditions.

Also, if your term insurance plan has lapsed and you are reviving it, disclosure of the smoking habit becomes mandatory. In the case of revivals, insurance companies require you to inform them about any facts that have changed throughout the policy. So, after buying the term plan, if you started smoking and then you are reviving the policy, you must inform the insurer of your smoking habits.

 

The bottom line

 

Smoking may prove to be a dangerous habit. However, if you smoke or develop a habit, inform the insurance company from which you are buying your life insurance policy. Non-disclosure might lead to claim-related disputes which are better avoided. So, be a responsible policyholder and uphold the principle of good faith. Inform the insurance company of your smoking habits, whether you have it at the time of buying the policy or at the time of renewal so that the u>claim settlement is hassle-free.

References

1https://www.cdc.gov/tobacco/basic_information/health_effects/index.htm

2https://www.who.int/india/health-topics/tobacco

3https://www.bankbazaar.com/term-insurance/term-life-insurance-for-smokers.html

BJAZ-WEB-EC-01912/22

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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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