Sunday, February 23, 2014

Smoking & Insurance

Smoking can significantly increase your monthly insurance premium.

Smoking affects all types of insurance policies -- from auto to health insurance. Insurance companies view tobacco use as a high-risk behavior. To counter the costly payouts to individuals who smoke, they must charge higher premiums for smokers and policy holders across the board. In this way, smoking affects everyone who carries insurance policies.

Insurance Policies Affected

Smoking affects auto, health, life and home insurance policies. According to a 2007 article in "Smart Money" magazine, insurance companies have collected statistical data that shows a higher risk of accidents among individuals who smoke. Home insurance companies, according to a MSN Money article entitled "The High Cost of Smoking," view smoking as a risk to the household due to fires and smoke damage. Health insurance companies view smokers as high-risk candidates for cancer, emphysema and other serious health problems. Life insurance providers know that, statistically, smokers will pay into policies for a shorter period of time due to shorter life expectancies, so they increase the cost of their policies.

Price Increases

Health insurance companies view smoking as a high-risk behavior, and, from a business perspective, must charge higher rates on policies serving smokers. For example, smoking has been shown by the U.S. Centers for Disease Control to cause certain types of cancer, resulting in a shortened life spans, and higher medical bills. Health insurance companies must recoup their payout expenses to hospitals for tobacco users, and thus charge higher premiums to smokers.

Industry Effects

According to the National Business Group on Health, smoking places a strain on the entire insurance system, from auto to life insurance. For example, when a health insurance company must pay the hospital expenses of its policy holders who smoke, the net profit of the company decreases. To counter added costs from smoking, health insurance companies will raise the prices of policies for all insurance holders, creating added financial stress to individuals.

Future Policies

According to the American Lung Association, smokers have a difficult time buying new health and life insurance policies. Insurance companies that do not have a "no smokers" policy will, at the minimum, increase the rate at which smokers can acquire insurance. Additionally, an insurance provider may limit the type of policy smokers may buy.

Smoking History

Insurance companies base coverage on whether you are a current smoker or a former smoker. According to a "USA Today" article that examined insurance company practices, if you are a former smoker, your policy rate and coverage will depend upon the length of time in which you smoked, as well as when you stopped smoking. If you smoke currently, your policy is affected by the length of time for which you have smoked.

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