How Smokers Lie and Pay Less for Term Life Insurance

When Alex Grebe signed up for term life insurance, he lied. The 28-year-old stated that he is tobacco free. “I know not to tell insurers the truth,” said the Long Island native who smokes cigarettes. Grebe only pays $50 a month for his term life insurance, but had the Manhattan resident revealed he was a smoker, he would have paid more than three times as much as a non-smoker for the same policy.

A 45-year-old non smoking woman pays $544 per year for a term life policy with half million in coverage for 20 years but with a smoking habit, her rate goes up 269% or $2,600 a year.

“Smoking causes one in five deaths in the U.S. and has been linked to many diseases like diabetes, lung and heart disease which are the three health issues that we know about,” said Laura Adams, senior analyst with InsuranceQuotes.com. “This is something insurers watch closely.”

Of course it’s hard for insurers to know when people like Grebe lie about their smoking habit. “I named my younger brother as the beneficiary,” said the Cornell University graduate. “He needs the money.”

However, if an insurer found nicotine in Grebe’s blood stream, his 26-year-old brother may not be so lucky as to receive the benefit but the chances of an insurer inquiring about a death are low unless it’s suspicious.

“Insurers wouldn’t have a reason to know a policy holder smokes unless they investigate,” Adams said. “This only happens when there’s a question about the death or if the policy is worth more than $1 million.

One way an insurer could determine whether a smoker is fibbing is by requiring a physical or check up annually to make sure the insured person is healthy. “But that would be up front,” said Adams. “It’s not something they can surprise you with.”

Blood work is typically not mandatory for term life policies, which can be part of a policy’s appeal.

“Insurers are probably charging higher rates to adjust for the risk that an applicant is lying when they approve you without a physical,” said Adams. “It’s a gamble that the insurers are aware of.”

How Smokers Lie and Pay Less for Term Life Insurance