Health and life insurers often ask a range of questions about a candidate’s physical condition and lifestyle choices, in order to assess the level of risk they are taking on.
A longstanding, number-one reason an insurer will assess a candidate as high risk is if they are a smoker.
In new research released by Canstar this week, smokers have been warned that due to lower life expectancies associated with smoking, they will pay up to $3,000 more a year for life insurance.
For example, a male aged 55 or above will pay on average $264 more a month than an average Australian if they are a smoker.
“Every health issue in the book is compounded by smoking, so it's not even slightly surprising that there's a high premium that keeps going up and up,” said group executive, financial services and chief commentator with Canstar, Steve Mickenbecker.
When to get insurance cover
Mr Mickenbecker believes life insurance is not subject to age, but circumstance, with anybody that has dependents needing cover.
“It’s about what financial dependents am I leaving. If I’m a 25-year-old and the unexpected happens, if nobody is relying on me, financially it doesn’t really hurt anyone,” he said.
“But once I have bought houses and have a family, that's a different matter as I have little people that actually need my income as well as being there for them.
“So, there is no absolute age, but it's the point of time where you have dependence.”
Is insurance worth it for smokers?
Despite the excessive cost for a smoker to get cover, Mr Mickenbecker still believes they should seek coverage as they are more likely to claim.
“If they still have dependents yeah, they should … They are the people that need the cover, their mortality is much more limited than those that don’t smoke,” he said.
Focus on what matters
Health insurance is all about value for money. With this, the price being paid is not as important as the things that are being covered, according to Canstar.
“Price isn’t everything, it’s the cover you’re getting that matters as well. There’s no point paying half as much premium if it’s going to turn out that you have no chance of being covered for a whole lot of things and one of those happens,” said Mr Mickenbecker
“So, it’s a much trickier judgement than getting a home loan and it’s just as important if you happen to be one of the unlucky ones that bet against yourself and lost.”
Cameron Micallef is a journalist at Nest Egg, writing primarily about personal wealth and economic markets.
Prior to this, Cameron worked for Australian Associated Press. He graduated from the University of Wollongong with a double degree in communications and commerce.