Smoking may have an impact on whether an insurance company is obligated to pay a claim.
When you apply for life or health insurance coverage, you can be sure you'll have to answer questions about any tobacco use. It is important to answer these questions truthfully, as failing to do so could jeopardize your coverage. In the case of life insurance, claim denial may mean your survivors won't receive the funds needed to maintain their present lifestyle or even face financial hardship.
Rating
Insurance companies charge higher rates for smokers and users of smokeless tobacco because of the proven health risks. Depending on the amount of insurance and the underwriting guidelines of the insurance company, if you apply for nonsmoker rates, you may need to submit a urine sample which can detect the presence of nicotine. If you applied for nonsmoker rates but evidence of smoking is discovered during the underwriting process, you likely will be offered the smoker rates instead.
Contestability
Policies such as those for life insurance typically contain a contestability clause, which indicates a period of time, often within two years, during which the company has the right to contest and possibly deny a claim for any valid reason. For example, if you were issued a policy with nonsmoker rates due to your statement on the application that you didn't use tobacco, but died within a year due to a smoking-related illness like lung cancer, the company likely has a legitimate reason for denying a claim.
Material Misrepresentation
Even after the contestability period, an insurance company may deny a claim due to a material misrepresentation. Regarding insurance, a material misrepresentation is a misstatement that would have led the company to not issue the policy as applied for if it had known the truth. Lying about tobacco use on the application would have led the company to issue the policy at nonsmoker rates as opposed to tobacco rates, so it has the right to deny coverage based on the misstatement.
Paying the Claim
Assuming you told the truth during the application process or passed any required nicotine tests, your insurance company likely will have great difficulty in successfully denying a claim, even if the event was smoking-related. If you haven't smoked for the requited number of years before applying for coverage, as indicated in the company's underwriting guidelines, or started smoking after the policy was issued, you should still be afforded coverage under the policy.
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