If you've successfully kicked the habit, congratulations-quitting smoking is one of the best things you can do for your health. But here's something you might not know: it could also save you a significant amount of money on your life insurance.
Former smokers who have been smoke-free for 12 months may be eligible to reclassify their life insurance status from smoker to non-smoker. The savings can be substantial-often 50% or more off your premiums.
The Cost Difference Is Significant
When it comes to life insurance, the penalty for smokers is steep. You may end up paying double, or even more, than a smoke-free person would pay for the same level of cover.
Here's what the numbers actually look like for $500,000 of life cover for a 35-year-old male with stepped premiums:
- •Cigna: $15.33 (non-smoker) vs $31.35 (smoker) - 104% more
- •Partners Life: $17.75 (non-smoker) vs $32.99 (smoker) - 86% more
- •Fidelity Life: $14.46 (non-smoker) vs $33.00 (smoker) - 128% more
- •Asteron Life: $445/year (non-smoker) vs $885/year (smoker) - 99% more
Over a 20-year policy, the difference between smoker and non-smoker rates could amount to thousands of dollars-money that could be going toward your mortgage, your KiwiSaver, or your children's education.
What About Vaping?
If you've switched from cigarettes to vaping, you might assume you'd qualify for non-smoker rates. Unfortunately, that's not the case. New Zealand insurers currently treat vapers the same as smokers when it comes to premium calculations.
While the health risks of vaping are believed to be lower than smoking, insurers haven't yet adjusted their pricing to reflect this. If you're vaping, you'll still be classified as a smoker for insurance purposes.
How Reclassification Works
If you originally purchased your life insurance as a smoker, you were charged higher rates and likely have a "loading" on your policy. After 12 months smoke-free, you can request to have this loading removed.
The process is straightforward:
Some insurers may require additional information or a health check, but in most cases the process is simple and doesn't require a new application.
The Long-Term Savings
Let's say you're paying an extra $20 per fortnight as a smoker. That's $520 per year. Over 20 years, that's $10,400 in extra premiums-not including any investment returns you could have earned on that money.
If you've quit smoking but haven't updated your insurance, you're essentially paying a penalty for a risk that no longer applies to you.
What To Do Next
Contact a life insurance adviser to review your current cover and request reclassification. Mortgage Lab offers in-house advisers who can help you navigate the process and ensure you're getting the best rates for your situation.
Don't miss out on the financial benefits after accomplishing the difficult task of quitting smoking. You've already done the hard part-now let your wallet benefit too.
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