Research suggests that confusion around life insurance is one of the reasons fewer millennials are buying policies compared to previous generations.
Long-winded questionnaires and the possibility of medical screenings add to the complexity.
It is important to help reluctant clients to feel more confident about taking out policies as part of vital financial protection.
Below, expert underwriter Darren Lee and insurance broker Jonathan Morris give their answers to some of the most commonly asked questions about how medical history, hobbies and medical screenings can affect life insurance premiums and some of the changes clients can make to their policy.
Medical history is an important part of assessing risk
Disclosing the details of health and lifestyle can feel daunting for some clients.
Clients will need to honestly answer a set of questions about their health to enable the insurer to assess their level of risk and ultimately decide the cost of the premiums.
But more importantly for the client, an honest application will provide certainty of a payout in the event of a claim.
Smoking
Morris: An insurer will consider an individual to be a smoker if they have used any of the following within the past 12 months – even if this is only once during this period of time:
- Cigarettes.
- Cigars.
- Vapes or e-cigarettes.
- Nicotine replacement products (patches, nasal sprays, or chewing gum).
Being considered a smoker will significantly increase the cost of the premiums that your client will pay for life insurance.
For long-term cover (up to the age of 90 or guaranteed whole of life), premiums could be double the cost of that of a non-smoker.
For shorter-term cover up to age 60 or 70, premiums could be even higher – up to triple what a non-smoker might pay.
Some insurers however can remove or reduce the smoking loadings during the term of the policy if the client stops smoking.
Vaping
Lee: Although vaping may seem like a lower risk option, it is a relatively new invention and therefore there is no long-term data about the potential damage it can do to health.
People who have quit cigarettes but still vape are still more likely than those that have never smoked to use cigarettes again in the future.
What about people who are ex-smokers?
Lee: From a risk perspective, if the client used to be a smoker there is a chance that they will have already had some damage to their health. They also have an increased likelihood of becoming a smoker again compared to someone who has never smoked.
Even though they are no longer smoking, their premiums may still be higher than that of a lifelong non-smoker, unless they have quit for a reasonable number of years.
Morris: The majority of insurers have introduced an ex-smoker loading for those who have used nicotine products within the past 5 years but have since stopped.
So, it is always worth looking at the long-term projections of the policy premiums and how different insurers premiums maybe reduced in the future to obtain the best policy for the client.
