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Must Know: Impact of tobacco consumption on your Insurance Cover

Tobacco consumption can affect not only your health, but also your pocket in the form of higher insurance premiums
By Preeti Kulkarni | May 31, 2017

It's World No Tobacco Day and you are likely to be swamped with campaigns explaining how tobacco addiction can prove to be costly for your health. Despite increased awareness, tobacco consumption continues to be a major health hazard across the world, with the World Health Organisation (WHO) estimating that tobacco use causes over seven million deaths every year.

But did you know that insurance-seekers addicted to tobacco also have to pay a heavy price for this habit? Read on to know more. 

How does tobacco affect life premiums?

Most life insurers have different premium rates for smokers and non-smokers, with the former being charged a much higher premium. For example, a 30-year-old male smoker will have to shell out up to 60 per cent higher premium compared to a non-smoker (see table).

What is its impact on health insurance?

While the probability of health-related claims arising out of tobacco addiction remains high, it does not have a direct impact on health insurance premiums. Also, it is a misconception that smokers are denied health insurance cover—a myth that often prevents many individuals from seeking one. “As of now, we do not reject smokers’ health insurance proposals outright. There is no loading on premium either,” says Sanjay Datta, chief, underwriting, claims and reinsurance, ICICI Lombard. As per a survey conducted by the company, less than one-third of the 1500 respondents polled owned a regular health insurance policy.

At present, health insurers do enquire about your smoking habits, but it is not a primary parameter in the underwriting process. "Insurers will not decline your proposal outright just because you are a smoker. However, if a heavy smoker has asthma or lung infection, then it is a factor to be considered. The proposal could be declined depending on results of medical tests. Alternatively, waiting period and exclusion for lung diseases could come into play,” explains Nikhil Apte, chief product officer, product factory (health insurance), Royal Sundaram.

However, there is a chance that things could get tougher for smokers in future. "The information on tobacco consumption is being captured so that it can be incorporated into underwriting at a later stage," says Apte. 

*For a 30-year-old male buying a Rs 1-crore term insurance cover with a tenure of 20 years



Source: Insurers’ websites


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