Term Insurance 309 views March 25, 2020

A Term plan is a type of life insurance policy that offers coverage in the form of a death benefit for a specified time period. If the insured dies before the expiry of the specified time period, a guaranteed death benefit is received. If the insured dies after the expiry of the specified time period, no amount is received. The premium on a term plan is calculated according to the age, health and life expectancy of the insured. Also, there are additional rider benefits with the policies which can be purchased at additional cost.

A Term plan protects your family against the uncertain incidents of your life by providing them with the much-needed financial security.

Term Insurance

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Why do smokers need a term plan?

Chances of smokers suffering from health hazards are more than in the case of non-smokers. Smokers can suffer from diseases like high cholesterol, blood pressure, heart and lung diseases, respiratory infections, mouth infections, ulcers, heart attack, stroke, cancer. As per WHO findings, in India, there are around 12% of the world’s smokers.  Over 1 million people die annually due to smoking. Death caused by smoking-related diseases like cancer and heart diseases accounts for around 52% of all deaths in India. Thus, the life expectancy of a smoker is lesser than a non-smoker. Therefore, it is very important for a smoker to get himself insured through a term plan to secure the financial expenses of their family during such medical emergencies.

Why higher premium is charged for smokers?

Premium amount paid by a smoker on a term plan is always higher than that of a non-smoker because they are riskier to insurance companies than non-smokers are due to their lower life expectancy ratio which is a resultant of the related diseases as discussed above. Thus, the premium for a smoker is calculated on the basis of smoking habits as well as, health and age.

Definition of a smoker as per insurers for buying a term plan:

For insurance companies, a person who consumes tobacco or nicotine as cigar, cigarettes, beedi, gutka, khaini, flavoured pan masala, nicotine chewing gum is called a smoker. Even if you smoke occasionally you will be considered as a smoker by insurance companies. In order to enjoy low premium on a term plan, you need to completely stay away from cigarettes and nicotine as only then you can be categorized as a non-smoker.

Categories of smokers:

Each smoker has a different smoking habit, so Insurance companies have categorized smokers according to their smoking habits to charge premium accordingly. Following are the three types of smokers and their different premiums:

  1. Preferred Smoker- They are smokers who other than smoking is otherwise overall fit. The premium for these smokers is minimum.
  2. Typical Smokers- They are smokers with small health problems. The premium for these smokers is slightly more than that of the preferred smokers.
  3. Table rated smoker- They are smokers with notable health problems due to smoking. The premium for these smokers is the highest because of the high risk for the insurance companies associated with such smokers as they have a very low life expectancy.

Information required from smokers before buying a term plan:

Before buying a term plan, smokers are required to provide the insurance company information about their smoking habits. Smokers need to go through a medical test before buying term insurance policies. So, the insured does not get any chance to lie to the insurer about his smoking habits. Moreover, some questions are frequently asked in various ways like whether a person consumes or has ever consumed or has consumed in the past four years, tobacco or nicotine products. There are many close-ended questions asked related to smoking habits in the application form which are necessary to be filled up by a smoker.

Effects of providing incorrect information before buying a term plan:

Providing incorrect information and trying to keep the insurance company in dark about smoking habits in order to avail low premium is ultimately not beneficial for the smoker. This is because if the insurer finds out the truth, then it will amount to fraud. In such case the individual need s to face the following charges:

  1. The individual can be held liable for scam and charged with fraud.
  2. The term plan will stand null and void.
  3. The individual will not receive the benefits that might have been added to the policy.

If the claim is rejected, then the family of the smoker will ultimately be the sufferer in the face of medical emergencies or the unforeseen death of the insured. As the term plans and premiums are differently designed for smokers so any false declaration is handled very strictly by insurance companies

Effect of quitting smoking after buying a term plan:

Quitting smoking reduces the risk of hazardous diseases that result from smoking and thus add years to your life. In case the insured quits smoking, he can request the insurer to reconsider his premium at the time of renewal of the term plan.  Generally, for considering a person as a non-smoker the person has to stay away from smoking for at least two years. Premium rates may be lowered depending on the time that has passed from the time when the insured has left smoking.

Features in general of Term plans for smokers:

The general features of a term plan for a smoker are different from that of a non-smoker. So, a person needs to understand the following features properly if he intends to be the beneficial owner of a term plan for a smoker:

  1. Policy eligible age- Minimum age of entry is 18 years, the maximum age to get coverage is 75 years.
  2. Policy term- Minimum: 5 to 10 years, maximum: 30 to 40 years.
  3. Sum Assured- Minimum: Rs.3 lakh, maximum: as per the request of the insured.
  4. Premium payment- Annual payment of premium.
  5. Eligible persons- Indian citizens residing within the country.
  6. Receipt of Sum Assured – Sum assured received by the nominee in case of death of the insured within the policy term. No maturity benefit received in case the insured is alive at the end of the policy period.

Benefit offered by a term plan to smokers:

Some term plans offer a benefit to smokers through an Accelerated Death Benefit rider along with the term plan. Under this benefit, the insured can use a part of the Sum Assured in case of any terminal illness, medical reports of which should be provided, of the insured while he is alive. After the death of the insured, the nominee will get the balance amount of death benefit left after utilizing a part of it earlier during the insured’s illness. This death benefit offered thus helps the family of the insured in meeting the medical expenses during urgent times of life. So, before buying a term plan the insured must go through the terms and conditions of the plan because all plans may not include the rider benefit.

Best Term insurance plans for smokers:

Following are some of the term plans specially designed for smokers that are cost-effective and comprehensive:

  1. iTerm Plan from Aegon Religare
  2. HDFC Life Click 2 Protect Plus Plan
  3. Aviva i Life
  4. Bharti AXA Life eProtect Plan
  5. LIC Amulya Jeevan

Conclusion:

Though insurance companies have facilitated smokers with many options of term plans and riders, that does not imply that smokers are encouraged to continue this hazardous habit. Insurers do not want smokers to remain uncovered for their unforeseen medical expenses. So, insurers have provided various term plans to smokers to help them choose the suitable best one among them.

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