Ex smokers may be unaware of the fact that they may be overpaying for their life insurance if they have quit for over a year but have not informed their insurance provider. According to Gavin Came, chairman of the financial planning committee at the Financial Intermediaries Association of Southern Africa (FIA), if someone has stopped both smoking and using nicotine-replacement products for over 12 months, they should qualify for a reduction in the cost of their life insurance.
A UK study conducted by MoneySupermarket.com found that the typical 30 year old male smoker with £100 000 (R1.2 million) of cover would pay approximately £4,209 (R54, 235.85) - or £14 (R180) a month - more in premiums over a standard 25 year life policy. In addition to this, 37% of former smokers in the UK believe that the smoking ban helped them to quit, according to research conducted by Pfizer.
Came said smokers in South Africa are also likely to pay a higher cost than a non-smoker due to the associated health risks. “The actual premium a smoker would be required to pay is dependent on a number of factors, including the number of cigarettes they smoke each day. On average, however, a smoker is likely to pay between 25% and 120% more for life insurance than a non-smoker.”
“Smokers pay a far higher price for their life cover, as well as other ancillary benefits. In the current environment, with costs such as electricity, fuel and food constantly increasing, it is vital that former smokers take the time to advise their broker or life insurer of a change in their circumstances as it could make a significant impact on their finances.”
Consumers should also inform their insurer about other changes they may have made to their lifestyle such as regular exercise as this can have a positive impact on the cost of financial services products. “Consumers who make an active decision to lead a healthier lifestyle should speak to their financial adviser to determine exactly how this can benefit them financially. For example, a heavy drinker will also likely pay higher premiums due to the health risks this would pose. However, if they have stopped drinking for a sustained period of time they should be able to review any loadings or exclusions.”
Updating details regularly will help to ensure that potential claims can’t be repudiated by insurers based on non-disclosure advised Came. He warned that while companies are likely to reduce the cost of premiums for clients who have quit smoking it is essential that they do not lie to their insurer to receive preferential rates. Clients must also inform insurers if they have not kicked the habit and started smoking again after informing their insurer otherwise.