If you’ve applied for term life insurance at all, you know that one of the questions you’re going to get asked is whether or not you smoke. Life insurance companies typically charge much higher premiums for smokers than they do for non-smokers. In fact, the cost can often be nearly three times the cost for the former than it is for the latter.

Why is the cost penalty so severe for smokers? Well, in short, life insurance companies prefer customers that have fewer health risks. If you have fewer health risks, your insurance policy is less likely to pay out and the company continues to make money on you. Insurance companies often have different tiers of classification based on your health. If you’re in good health and haven’t smoked in five years or more, you fall into the “preferred plus” category and your chances of dying soon are small and you’ll get the best premium rates. If you haven’t used tobacco in the past three years you’re in the “preferred” category and you’ll get lower premiums than smokers. A “standard” rate is one in which you haven’t smoked in a year. That one will cost a little bit more. At the top of the cost list, of course, is the smoker’s rate.

The smoker’s rate applies to people who have used tobacco products within a certain amount of time, typically one year. Those products include not only cigarettes but cigars and chewing tobacco as well. Even if you only enjoy an occasional cigar, you’re considered a smoker by the standards of the insurance company.

Depending on the type of insurance policy you choose, you may or may not need to take a medical examination in order to qualify for your life insurance policy. If you do, a urine test may be a part of that process, and your urine will be tested for traces of nicotine. If you claim to be a non-smoker and traces of nicotine are found in your urine, you could be denied coverage.

There is another scenario in which smoking could affect your life insurance. If you don’t smoke when you apply for the policy but start up later and wind up passing away, your insurance company may be able to deny your claim based on the fact that you were “dishonest” in your insurance application. This could arise from a clause in the policy, known as an “incontestable clause” that allows an insurance company to challenge a death claim, usually within a couple of years of the policy’s origination.

Photo via scottfeldstein