In the wake of the smoking ban, the number of people giving up smoking trebled. That’s a big money-saver, but they’ll also qualify for another bonus.
A 20-a-day habit costs about £2,000 a year, which means it burns up at least £2,500 of your pre-tax income. Quitting the weed is about the most slam-dunk no-brainer win-win imaginable. (That’s why I’ve done it several times.)
OK, so you’ve done it. You’re among the 400,000 people who have packed it in over the past 12 months. Now think about saving money on your life assurance.
Smokers are a bad risk
Every life assurer loads up the premiums for smokers. Let’s take £200,000 of life cover for 20 years for a 35-year-old man. The monthly premium for the lowest-cost policy for a smoker is £26 per month and for a non-smoker £15 per month. The non-smoker gets a 42% discount, or a saving of £2,640 over the term of the policy. It’s another useful saving.
So at what point can you benefit from being reclassified as a non-smoker? In almost every case it’s 12 months after you quit. You must sign a declaration that you haven’t smoked for a year, and if there’s any chance the assurer may contact your GP, take the obvious step and make sure you’ve told your doctor that you have given up.
Some life assurers will allow you to keep exactly the same policy but simply reduce the premium to the non-smoker level. But many won’t, in which case you’ll have to get quotes from them – and preferably a life broker - for new policies.
Premiums are much higher for smokers
You’re older now, so that means a higher premium. But given the huge non-smoker discounts, you can be many years older than when you took out the original policy and still save money by switching to a non-smoker policy.
But this applies only if your policy is a term assurance and you are in good health. If your health has deteriorated, then a new policy may cost you significantly more – health issues that significantly increase the mortality risk usually mean paying at least 20% more than the normal premium and often much more. So you may well be better off sticking with what you’ve got.
And if you have a Critical Illness-plus-life insurance package, you’d probably better consult an Independent Financial Adviser. A couple of years ago, most assurers changed their CI policy wordings, effectively reducing the scope of cover of newer policies and making the old policies more valuable. So even if you could replace an old CI policy at lower cost, the scope of the cover would be inferior and it wouldn’t be worth doing.
Another way to look at it is that if you’ve become a non-smoker, you can probably afford to increase your cover by a third to a half and pay no more in premiums. Think of it as a freebie for life.
