Photo: Christian Hartmann. Reuters

JOHANNESBURG – Thanks to years of medical research, the link between smoking and cancer is undeniable. 

In some countries, like the UK, smoking accounts for approximately one in four cancer deaths, whereas here in South Africa, nearly 10% of all deaths are reportedly caused by smoking. It’s no wonder then that giving up smoking is such a popular New Year’s resolution.

However, over and above the proven health benefits that come with kicking a smoking habit, many people fail to take into account the positive impact this resolution can have on their insurance premiums (not to mention their wallets).

This is a point raised by Jonathan Elcock, founder and CEO of CompariSure, who explains that smokers typically pay an increased insurance premium, which is based on actuarial calculations that consider the complications and claims experience of smokers both in insurance-covered medicine and clinical settings.

A useful analogy for this, explains Elcock, would be home insurance for natural disasters. “Imagine two houses, both worth R2million. The one house is in a city that’s never had an earthquake or flood, while the other is in a city known for having earthquakes and is close to a river prone to flooding. 

The owner of the house in the risky city will understandably be charged a higher premium to reflect the higher risk on what is being insured. The same applies to people, given the fact that we are all different.”

While there is no hard and fast rule when it comes to insurance for smokers, Elcock says that one thing is for sure: all insurers agree that smoking leads to higher chances of cancer and death, and thus, they charge higher premiums for it.

What does differ, he says, is how insurers calculate smokers’ premiums and what type of underwriting they use. 

“For some insurers, with certain products, they will lump smokers and non-smokers together, and charge everyone the same blended rate. In this case, smokers would benefit as non-smokers would effectively be subsidising their premiums.

“This is often the case with funeral cover, where underwriting – the set of health and lifestyle questions the insurance companies ask when issuing a policy – is often quite limited,” says Elcock.

“On the flip side of the coin, most big insurers will underwrite you up front if you purchase full life insurance. So as a healthy non-smoker, it’s definitely better for you if your insurer assesses your health and confirms your non-smoking status because this will usually result in them charging you lower premiums to reflect this,” he said.

Over the course of a lifetime, Elcock estimates that the difference in premiums charged for smokers and non-smokers could add up to hundreds of thousands of rands – as illustrated below.

“Below is an example of quote estimates, showing actual monthly premium amounts for R2m life cover from three different South African insurers.”

(Graph: Quote estimates for R2m life cover for a 40-year-old male office worker with a Matric earning R30, 000 per month)

Assuming the person above has gone with Insurer B, Elcock points out that his extra premium will be R284 per month, or just under R3,500 in the first year.

“Let’s assume he pays his premiums until age 75 then dies, and assume premiums go up by 5% every year, the total extra amount he will have paid is just over R300,000! And now assume it wasn’t R2m cover, but R10m cover – you can easily end up paying millions extra for being a smoker.”

He notes, however, that once a policy is in place, a person typically cannot ‘change’ their smoker status, which means they may be locked in with their policy. 

“That being said, insurers do vary in this regard, so it’s always best to ask whether it is possible to change to non-smoker status upon quitting, or alternatively look at switching to a new policy altogether,” he advises.

Elcock says that, typically, applicants must have refrained from smoking cigarettes for at least 12 months to qualify for non-smoker life insurance rates. 

“As such, if you plan on quitting smoking for your New Year’s resolution, you’ll need to stick to this resolution for the next 12 months, after which you should review your life cover as there is a good chance you’ll qualify for much better rates.

“Clearly, there are significant differences in rates (both for smokers and non-smokers) between insurers, so it’s always a good idea to shop around to see which insurer treats your unique risk category the best. This is where an independent online life insurance comparison platform like CompariSure can prove to be very valuable,” Elcock said.

Supplied by CompariSure