Non Smokers Saving Money, Improved Life Insurance but Poorer in Retirement?

Friday, July 27, 2012, AM | Leave Comment

It has now been five years since the introduction of the smoking ban in England and if you were one of the many who chose to quit at that time you could be over £14,000 better off as a result of kicking the habit.

It is estimated that anyone who has been ‘smoke free’ for five years has not only saved themselves an astonishing £7,250 on the purchase of cigarettes but also made an impressive saving of up to £7,000 on insurance premiums.

Not only will your bank balance have benefited but also the state of your health. However, will you be better off in retirement? It appears that those of us who live longer may be poorer in retirement and the reason for this is that insurance companies know that smokers are likely to die younger and so they pay better pensions to them than to non-smokers.

Non-smokers, however, fare better with many financial products which offer big discounts to those who steer well clear of nicotine addiction. But the way annuities work means that non-smokers are at a disadvantage as the annuity is likely to be required for a longer period, which means a lesser amount is paid annually.

The definition of a smoker, as far as annuities are concerned, is someone who has smoked at least 10 cigarettes a day for 10 years. No wonder people seem to make the switch nowadays to vaping. It is a trend now and they sure might get some savings in insurance fees too. (Go to DaVinciVaporizer.com to find out about portable vaping).

Hidden Costs of Smoking

A smoker on 10 a day is paying roughly £1,144 per year for their habit but they are also paying a premium for life insurance or critical illness insurance. Obviously, as a smoker you are considered a higher risk so it makes sense that premiums are higher than those for a non-smoker with a healthy lifestyle. Smokers pay about a third more on average.

It follows that over the long term, not smoking can lead to savings on insurance policies such as critical illness cover and income protection, both of which pay out in the event of the diagnosis of certain specified illnesses or unemployment as a result of ill health.

One of the key factors considered by insurers when working out premiums is smoking, together with the age and health of the applicant. Smoking can in some cases double the cost of the premium.

Tell the Truth

A non-smoker must have been smoke free for at least 12 months without the aid of nicotine-replacement products. Insurers will even ask applicants to take a cotinine test if they have any doubts. This test checks for nicotine in the body by measuring the levels of the chemical cotinine, which is made in the body from nicotine. It can be tested via blood, urine or saliva and usually needs to be corroborated by the applicant’s doctor.

It is essential to be honest when applying for life insurance as any lie later uncovered could invalidate a future claim if your medical records reveal you are a smoker.

At the end of the day, the choice to quit is yours but the financial implications, not only the cost of the cigarettes but also the cost of various insurance policies, should surely enter into any deliberations about whether or not to stop.

Author BIO

Post supplied by Tony, a UK finance blogger who loves to find a bargain and save money. If you want to keep costs down on any insurance products, use SO Switch insurance comparison to see how much you could save!

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