Last Updated : Mar 01, 2018 10:09 AM IST | Source:

Want to pay lower insurance premium and create greater wealth? Here’s a way

Pay less premium on your insurance policy and create lakhs of wealth, if you quit smoking!

Navneet Dubey @imNavneetDubey

Have you ever visited insurance websites to calculate your insurance need? If yes, then while going through the steps - providing your name and date of birth, you must have come across to this question asked by every insurer while visiting their portals - have you consumed tobacco in the last 5 years or simply, do you smoke – Yes or No? Insurer always asks this question because it plays a crucial role while deciding one’s premium paying amount.

Insurance works on the principle of Pooling and Sharing of Risks. Under this guiding principle, an insurer forms a common pool of people sharing the same risk and provides them insurance coverage against the risk for a regular premium contribution from them.

Mahavir Chopra, Director - Health, Life & Strategic Initiatives, told Moneycontrol that people who have a habit of smoking tobacco or are nicotine addicts pose a greater risk of falling prey to diseases related to heart, lungs, brain, pulmonary diseases and various forms of cancers. This increases health risk faced by them and results in a higher chance of a claim arising from such people. On the other hand, members of the pool who are non-smokers and live a healthy lifestyle would be less prone to making a claim and may outlive the term of the insurance plan. Such a situation works against the principles of insurance.

“It thus becomes the insurance company’s responsibility to ensure that all the participants of the common pool are on an even footing. Hence, to achieve this equality among all members, a higher premium or an extra amount is charged from people having adverse health and lifestyle habits like smoking. As smoking gives greater exposure to health risks, this directly results in higher premiums,” said Chopra.

Thus, factors that affect an individual’s ability to live longer have a direct bearing on their insurance premium.

Get rid of smoking habit and reduce your premium

If you are paying a higher premium towards your policy and you think that you have realized the disadvantages of behind smoking and now you want to quit your habit you have the option to reduce your premium paying amount.

Adhil Shetty, CEO – said that you do have the option to reduce premium amount if you quit smoking. However, it comes with some caveats. Primarily, you have to prove yourself fit, and this means you need to get your medical underwriting again. The changes chronic tobacco use makes to your body can last for as much as a decade depending on how long and how much you have been smoking. Tobacco consumption coupled with age can lead to conditions such as hypertension that tend to remain undetected without medical screening. So, if any of these show up in the subsequent medical tests, your premium may remain the same or actually go up instead of coming down.

“Whether you have just quit smoking or are working on doing so, be honest in your insurance declarations. Any mismatch between your declarations and medical tests could affect your chances of getting your policy and the premium you pay for it,” added Shetty.

Quit smoking and get your insurance free with a cover of up to Rs 1 Crore

You may be wondering that how quitting smoke can make your policy free of cost. Well, today one cigarette can cost you around Rs 15-17. On the other hand, getting a term insurance cover of Rs 50 lakh to Rs 1 Crore can cost you a premium of approximately ranging from Rs 17-22 a day (price taken of a non-smoker, male, age below 30 years, policy term of 30 years). So, if you can quit your smoking habit, you can actually buy an insurance cover to protect your family almost for free. Moreover, the premium price also gets reduced for the same cover.

Quit smoking and create a corpus of approximately Rs 40 lakh

Given the cost of a cigarette, quitting means saving nearly Rs 500-600 on just one cigarette stick a month. Therefore, if you do an SIP of the same amount that is of Rs 600 for 30 years, you will be able to create a wealth of Rs 40 lakh approximately. Moreover, even if you don’t invest, you will still be able to save lakhs. Now, just give a thought how much cigarettes you actually consume on a daily basis and how much money you can actually save a month – This question will give you an eye-opening answer.

Do think about it..!!

First Published on Mar 1, 2018 10:09 am

tags #insurance

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