Types of Life Insurance for Smokers

iQuanti: Many smokers incorrectly believe they don't qualify for life insurance. But the good news is there are types of affordable life insurance for smokers. And quitting could not only improve your health but your life insurance options and rates even more. So if you're interested in life insurance for smokers, here's a deeper dive into how it works and what plans may be available.

Can smokers qualify for life insurance?

Life insurance for smokers typically comes at a higher premium rate than non-smokers. That's because life insurance companies are assuming more risk by insuring the life of a smoker. In general, smokers may face more health issues than non-smokers and have a decreased life span.

Because of the health risks associated with smoking, insurers typically ask about tobacco use as one of the primary factors when calculating premiums. But certain types of life insurance policies may be more favorable for smokers.

Types of life insurance available to smokers

There are several types of life insurance smokers may want to consider:

Term life insurance

A term life insurance policy lasts for a set number of years, often between 10 and 30. If you pass during the policy's term, your beneficiaries will receive a death benefit payout. Once the term expires, you may have the option to renew the policy or need to apply for a new one.

A term policy can be a strategic way for smokers to have coverage as they quit. For example, by the time a five or ten-year policy expires, you may have several tobacco-free years under your belt. And that means you could apply for a longer-term life insurance policy at more preferred, non-smoker rates.

Permanent life insurance

A permanent life insurance policy, which includes whole and universal life insurance, covers you for life. The big differentiator of a permanent life insurance policy is that it offers the ability to accrue cash value, which grows with the policy based on the terms outlined by the insurer.

However, because coverage lasts a lifetime and accrues cash value, permanent life insurance policies have a higher price tag than term life coverage. But the investment component can be valuable for someone who wants to use it as a financial tool in addition to a life insurance policy.

Guaranteed issue life insurance

Guaranteed issue life insurance policies typically do not require any medical exam or information. So, if you apply for one of these policies, you may not even disclose to the insurer that you smoke. But the downside is that these policies are limited in death benefit payouts, often amounting to no more than $50,000 in coverage. And they may have high premiums too. For this reason, they're typically considered by those who want to pay for final expenses or leave loved ones a small legacy.

Many employer-sponsored life insurance plans are guaranteed issue up to a certain amount. Since premiums are often covered 100% by the employer, these policies are worry-free for smokers. That's because there's no medical exam requirement unless you're applying for coverage outside the scope of what's guaranteed. But make sure to keep in mind that an employer-sponsored policy may not be portable if you change jobs.

Benefits of life insurance for smokers

Despite the higher than average costs, the benefits of having a life insurance policy could be worth it for smokers. Some benefits include:

• Financial protection for loved ones. Whether your life insurance policy covers funeral expenses or replaces income, it can provide a financial cushion for loved ones. That gives you peace of mind that loved ones will be cared for after you're gone.
• Leave a legacy. The right life insurance policy provides financial peace of mind while also leaving a financial legacy. Loved ones may receive money that enables them to pursue a dream or take more time to grieve.

The bottom line

Life insurance for smokers tends to be more expensive due to an increased risk to insurers. But there are still several policy options available for smokers, including term life insurance, permanent life insurance, and guaranteed issue life insurance. Before choosing a policy, it's smart to shop around for multiple quotes. That way, you'll receive the level of coverage you want at the best price possible.