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Life Insurance Costs Double for Smokers

In data released for ‘World No Tobacco Day’ (May 31), Canstar found the difference in average monthly premiums for $500,000 of direct life insurance for males aged between 40-49 who smoked was 103.67% more than non-smokers in the same age group, and 102.55% for smokers aged 50-55 years old.

Canstar found the figure was high across the board for men smoker’s aged 20-29 paying 63.44% more, while those aged 30-39 paid 82.37% more and those above 55 who smoked paid 93.10% more than non-smokers.

Similar figures existed for woman who smoked aged 40-49 paying 81.92% more than non-smokers, followed by those aged 50-55 who paid 79.34% more and those aged over 55 paying 75.30% more than non-smokers. Younger age groups also paid more with smoker’s aged 20-29 paying 56.02% more than non-smokers while those aged 30-39 paid 62.79% more than non-smokers.

CANSTAR Wealth Manager, Paul O’Connor said smoking was already expensive with the cost of a packet of 25 cigarettes predicted to reach $40 by 2020 and insurer’s rules around smoking were very strict in their application.

“Most personal insurance policies will ask whether you have smoked at all within the last 12 months. Even if you smoke just one or two cigarettes now and then – or if you use a nicotine patch or have an occasional cigar – it can cost you hundreds of dollars each year in additional insurance premium costs.”

“Obviously that type of cost is going to be uneconomic for some people, particularly as they age, which can result in a lack of insurance right at the life stage they need it,” O’Connor said.

Canstar also found that average monthly premiums for men and woman for direct income protection insurance with a monthly benefit of $6,250 was around 22% more for smokers, regardless of occupation.

O’Connor said the amount that could be saved by smokers, beyond the price of cigarettes themselves, was high but was not unexpected from a life insurer point of view.

“Keep in mind that the cost of life insurance and income protection isn’t greater for smokers for no reason – smokers pay a higher premium because they have a higher risk of claiming. When it comes to life insurance in particular, that’s a pretty uncomfortable thought!”

Source: Risk Info news 31 May 2016


The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial planner.

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Principal address: Level 1, 65 Palmerston Crescent, South Melbourne Vic 3051
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