Life insurance premiums are priced, in part, by your lifestyle. If you live an unhealthy lifestyle, then the insurance company may charge you more for life insurance than someone who lives a healthy lifestyle if all other risk factors are equal. One risk that life insurers measure very carefully is whether or not you smoke.
Risk Class
Life insurance companies may rate you as either a smoker or a non-smoker. A non-smoker is someone who never uses any tobacco products. A smoker is someone who has used tobacco products of any kind within the last 12 months. Some insurance companies will consider you a non-smoker if you smoke less than a certain number of times per year or only smoke cigars on special occasions. This, however, is left up to the discretion of the insurance company.
Significance
The significance of being rated as a smoker is that your premiums are higher than a non-smoker's premiums if all other risk factors remain equal. Your premium could be up to $100 over a non-smoker's premium, but this depends on how much you smoke and how the company rates tobacco use.
Benefit
The benefit of being a smoker lies primarily in purchasing a permanent, cash value policy. Since smoker's premiums have a higher cost of insurance, less death benefits can be purchased for the same amount of premium when compared to non-smokers. Consequently, the cash value of the policy may build up faster inside of a cash value policy, because less death benefit is being purchased for the premiums being paid, even though the cost per $1,000 of death benefit is higher. The benefit of being rated as a non-smoker is that death benefits are cheaper per $1,000 of death benefit. This means that you may purchase more death benefit than you could if you were a smoker for the same amount of premium.
Misconceptions
A common misconception is that once you are rated as a smoker, you will always pay higher premiums. This is not true. If you quit smoking for 12 months, you may be re-rated by the life insurance company. Life insurance companies commonly allow you to be re-rated by filling out an application to change your risk rating, also called your risk profile.
Considerations
If you are a smoker now, don't think that you can't get better rates in the future. Consider purchasing life insurance while you still qualify. Smokers usually do not have problems buying life insurance, although you will have higher premiums than non-smokers. However, you could use this as an opportunity to stop smoking and reapply for a non-smoker status after 12 months of not using any tobacco products.
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