We parse out the difference between smoking and non-smoking rates.
Most insurance companies require an applicant to be tobacco free for 12 months before they qualify for non-smoker rates. To qualify for preferred rates, (which are further discounted rates given to applicants in very good health with very good family health history) most life insurance companies will require the applicant to be tobacco free for three to five years.
The following are some additional points to consider:
- Smokers can pay up to double the rates of a non-smoker on term life insurance policies. For example, a 40-year-old, male non-smoker will pay $363 a year for $500,000 in Term 20 coverage, but a 40-year-old, male smoker will pay $858 a year for the same coverage.
- The price difference between smokers and non-smokers is less pronounced on permanent policies. Sometimes the difference in premium us usually 20% to 30%. For example, a 40-year-old, male non-smoker will pay $1489 a year for $100,000 in 20-Pay Whole Life coverage, but a 40-year-old, male smoker will pay $2,002 a year for that same coverage.
- Some companies still offer preferred rates to smokers on their term and permanent policies, but be careful because they may only offer these preferred smoker rates to cigar or pipe smokers, instead of cigarette smokers.
- Many guaranteed issue and simplified issue life insurance policies have blended smoker or non-smoker rates, meaning that smokers and non-smokers pay the same premium. Guaranteed Issue plans have no health and no medical questions. On the other hand, Simplified Issue plans may have no health tests, but they do have a short series of health questions.
- Many mortgage insurance providers also offer blended rates were smokers and non-smokers pay the same premium. This is a good value for smokers, but results in non-smokers overpaying for their life insurance premiums.
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