.png){kind=small}
One lifestyle-related question that the insurer’s questionnaire definitely contains is regarding the use of tobacco including smoking and/or using smokeless tobacco/nicotine. If you are a habitual user of tobacco products, you will be charged a higher premium than a non-smoker. This is because, statistically the risk of death is higher among smokers compared to non-smokers and the insurer will take on this additional risk only if you are willing to pay a higher premium.
Smoking has been proven as a main reason for various ailments including but not limited to various cancers including those of lung, throat, oral, etc. It is also being considered as a key reason why tobacco users tend to have shorter lifespans than non-smokers. As result of this, a term insurance plan for smokers tends to be more expense compared to similar plan for non-smokers. Read on to know what is different about term insurance for smokers, classification of different types of smokers in India, as well as, key reasons why smokers should buy a term plan in spite of the high premiums.
What’s Different About a Term Insurance Plan for Smokers?
A Term plan for smokers does not offer any special features that are not available in any other term plan. Just like any other term plan, the core feature is the payout of death benefits if the life assured passes away during the policy term. However, there are a few key differences regarding how a smoker’s term plan application is handled compared to a term plan application from non-smokers. Here’s how it works:
Disclosure by Applicant
The first step of the process starts with a disclosure by the applicant identifying himself/herself as a tobacco user in the term insurance application form. This is typically followed by related questions such as type of tobacco use - smoking, chewing, etc. Additionally, questions related to the quantity of tobacco products consumed on a weekly/monthly basis.
More Stringent Risk Assessment and Underwriting
Once an insurer receives a term insurance plan application from a smoker, specific underwriting policies regarding handling such potentially high risk applications come into play. For starters, insurers tend to apply more stringent risk assessment criteria such as carrying out a mandatory medical check-up to determine the current health condition and the potential health impact that tobacco use has caused so far. Based upon the test results, the decision to accept or reject the term plan application is taken.
Higher Premiums than Non-Smokers
Once a smoker’s term plan application has been accepted, the next step is for the insurer to estimate the level of risk involved and the term plan premium is set accordingly. Generally, while smokers pay a higher premium than non-smokers, currently healthy smokers pay lower premiums than smokers who have been diagnosed with any health conditions that may be related to tobacco use. This high premium is charged by the insurer to partially offset the higher risk associated with tobacco use.
How are Smokers Classified by Insurers in India?
As already mentioned, healthy smokers tend to be offered a lower premium than smokers with existing ailments. But to understand the rationale behind this, you need to have a clear idea of how insurers in India classify smokers. These 3 key categories of smokers are:
Typical Smokers
These are individuals whose health shows mild irregularities due to their smoking habit. While these individuals are currently healthy, they have significant vulnerability to various future health risks. As a result, the insurer will charge a higher premium on these plans compared to similar plans for non-smokers.
Preferred Smokers
These are smokers who do not currently show any health irregularities in spite of their smoking habit. These individuals might be undertaking regular exercise along with a balanced diet which has allowed them to maintain perfect health. As result, insurers may be willing to offer them lower premiums than other categories of smokers.
Table Rated Smokers
These individuals have additional ailments such as a family history of diabetes or cardiovascular disease. This, in combination with their smoking habit results in an even higher risk of various potentially life-threatening ailments. So insurers may charge these individuals even higher premiums compared to typical smokers.
Why Should Smokers Consider Purchasing a Term Plan?
It is a well established fact that smokers are charged are higher premium for term plans compared to non-smokers. Yet there are many reasons why purchasing a term plan makes sense for smokers, these include:
Lock-in Premiums Based on Current Health Status
When you apply for a term plan as a smoker, the insurer takes into account your current health condition to decide your eligibility as well as your policy premium. This in effect locks-in your term plan premium based on how your current health condition is. But if you wait and your health condition worsens at a later date due to smoking, you will have to pay an even higher premium as you are older and your health condition is worse than earlier.
Ensure Financial Safety Net for Family
At the core, a term plan for smokers offers the same life cover benefit as a term plan for non-smokers. So, by purchasing this policy you are providing a financial safety net for your family. Considering that as a smoker you are at a higher risk of an untimely death compared to a non-smoker, ensuring this benefit to secure your family’s financial future is non-negotiable.
Option for Additional Protection via Riders
A term insurance plan for smokers offered by most insurers offer the same rider options as a term plan for non-smokers. This allows you the opportunity to augment the life cover benefit offered under the base plan by including financial protection on diagnosis of a terminal illness, critical illness, disability, dismemberment or accidental death.
Tax Benefits on Premium Payments
The higher premiums you get charged when purchasing a term insurance policy for smokers offers tax deduction benefits under Section 123 read with Schedule XV of the Income Tax Act, 2025 (earlier Section 80C of Income Tax Act, 1961). The maximum benefits under this section is capped at the overall limit of ₹1.5 lakh in a tax year. However, as per current rules, you have to file taxes under the old tax regime in order to avail this benefit.
Tax-Free Payout for Policy Nominee
The death benefit payout to the policy nominee is made in case of the life assured’s demise during the policy term. This holds true for all term plans including term insurance policies for smokers. What’s more this payout is tax exempt as per current provisions of Section 11 of the Income Tax Act, 2025 (earlier under Section 10(10D) of Income Tax Act, 1961). This means that the financial net you leave for your loved ones will not carry any additional tax burden for the nominee(s) or other policy beneficiary.
Concluding Thoughts
Smoking is an expensive habit - you pay for the tobacco, the treatment for health issues that tobacco use causes and also for the higher premium the insurer charges for a smoker’s plan. But even then your financial responsibilities for your dependents need to take centre stage and buying a term insurance plan for smokers can provide financial safety for your family. But in the longer term it might also be advisable that you seek professional guidance and quit smoking. Who knows you may get a double benefit out of the effort - no more paying for tobacco products and maybe you will be able to negotiate a lower premium if you stay tobacco-free for an extended period of time.
Frequently Asked Questions
What happens if I Start Smoking After Purchasing My Term Plan as a non-smoker?
If you were a non-smoker at the time of purchasing your policy and became a non-smoker at a later date, it will not automatically lead to policy cancellation or higher premiums. However, if you happen to pass away due to smoking-related illness, it may lead to complications in the claims process at a later date unless you have notified your insurer of this key lifestyle change ahead of time.
Can I get a lower premium if I stop smoking after purchasing my term plan?
No, this is not possible in most cases. However, in the case of some insurers you may be able to negotiate a lower premium if you are able to prove that you have been a non-smoker for a continuous period of 2 to 3 years. Since such decisions are at the sole discretion of the insurer, it is best to check with the insurer if such negotiation is in fact possible.
Can smokers avail term plan riders?
Yes, smokers purchasing a term policy are allowed to opt for various riders including those for terminal illness and/or critical illness. However, they might need to undergo specific medical tests and examinations to ensure they are in good health as well as otherwise eligible to opt for their chosen riders.
What is the definition of tobacco use as per insurers in India?
As per current rules, tobacco use from an Indian insurer’s perspective includes smoking, chewing tobacco, vaping, use of e-cigarettes, snuff, nicotine patches/gum, etc. So, in broad terms, the consumption of nicotine in any form smoke or smokeless over a period of the past 12 months or shorter period is considered as tobacco use by insurers in India.
Why are term insurance premiums higher for smokers compared to non-smokers?
Smokers are at higher risk of contracting a number of critical illnesses including various cancers and cardiovascular diseases compared to non-smokers. There is also significant evidence that smokers are at higher risk of premature death compared to non-smokers. From a life insurer’s perspective this indicates that a smoker is a higher risk applicant compared to a non-smoker. So the insurer charges smokers a higher premium than a comparable policy purchased by non-smokers with a similar demographic profile.
