| What
if you lied about your smoking habit on your life insurance
application? And what
happens if the insurance company finds out? How much
do you have to smoke to even be
considered a smoker? The answers might surprise you. Life
insurance companies like their policyholders to be
in good health. So much so that some
companies have three different premium classifications:
standard, preferred, or preferred
plus. You're rewarded with lower premiums if you're
super-healthy and haven't smoked in five
years because that reduces your chances of dying soon.
Being just "normally healthy"
requires that you haven't used nicotine in the past
three years and still gets you lower
premiums. A standard rate requires that you have not used nicotine within the past year. Then
there are smoker rates. Who is Considered a Smoker?
In
the life insurance world, you're considered a smoker
if you answer "yes" to the smoking
question on your insurance application. If you're asked
if you've used tobacco products,
including cigarettes, cigars, and chewing tobacco,
within the past three years — and
you have — your answer should be yes (likewise
for questions going back two years and
one year). If you enjoy a good cigar from time to time
or smoke just two cigarettes year,
you are
a smoker by insurance standards, even though the nicotine
traces won't show
up in your required urine test. How should the occasional
smoker answer that question? You
should probably let your conscience be your guide. Insure.com
looked at both nonsmoker and smoker rates from an online
insurance quoting
service for a 20-year term insurance policy of $100,000
for a 35-year-old male in
Connecticut. A preferred-plus person (a healthy nonsmoker)
would pay $95 to $117 a year,
while a standard smoker (who is healthy, despite the
smoking) is charged between $288 and
$308. Since
smokers pay nearly three times the premium of nonsmokers,
it's easy to see what
motivates some people to lie on their policy applications. You Can Sneak Through
With
rates as competitive as they are, life insurance companies
try to find out as much as
possible about your health. Understandably, a nonsmoker's
application is likely to be
examined a bit closer than a smoker's, especially the
results of the urine sample. However,
it is possible for the nicotine level in a smoker's
urine to be low enough to escape
detection. In fact, according to a 1988 surgeon general's
report, your body metabolizes, or
breaks down, nicotine within 72 hours. The
Centers for Disease Control and Prevention's Office
on Smoking says that there's such a
small amount of cotinine present in your body after
three days that it's either not
detectable or attributed to second-hand smoke. Cotinine
is a primary metabolite of nicotine
and is the most common identifier for nicotine levels
in the urine. Therefore, even heavy
smokers who can abstain for three days could theoretically
lie about their smoking and go
undetected. Is It Worth It?
So,
if you "pass" your urine analysis, where do you go from there? It
goes without saying (but we'll say it anyway) that you should not
lie
on your
insurance application. The application you sign becomes
part of your policy (you'll find it
attached somewhere near the back), and the policy is
a legal contract between you and the
insurance company. Some
insurance companies we spoke to say they have caught
smokers who claimed to be
nonsmokers during the underwriting process. When this
happens, the "proposed insured," as
you are known, is simply given the smoker rate when
the policy is approved. None of the
insurance companies admitted they would automatically reject you if they caught you lying. As
an extra precaution, The Horace Mann Cos. of Illinois
performs random phone calls in
which applicants are again asked, among other things,
about smoking. They hope to weed out
liars through the one-on-one conversation or by spotting
inconsistencies on the policy
application. On the other hand, Hartford Life and Annuity
Insurance Co. in Connecticut is
confident it could finger a deceptive smoker during
underwriting, pointing out that urine
testing is required of applicants over the age of 16. Lie, Die . . . Deny?
Let's
continue the scenario: Your urine sample doesn't show
enough nicotine to prove you're
a smoker, so your life insurance policy is issued at
a preferred and/or nonsmoker rate.
Then, the unthinkable happens: You die. Most
life insurance policies carry a two-year "incontestable
clause" that allows the
insurance company to challenge a death claim. If you
die within the first two years as a
result of, say, a car accident, and it comes out that
you were, in fact, a smoker, your
insurer would have the right to "rescind" the policy or simply deny the claim. If
you lied about smoking to Hartford Life and you died
after two years, the company would
pay the claim. However, a spokesperson emphasizes that
the insurer's underwriting is so
stringent that it doesn't expect to have a problem with dishonest smokers. If
you die three years after your policy is issued, underwriters
would take a closer look to
see if anything on your application and medical exam
could be linked to smoking. A
smoking-related illness, such as lung cancer or heart
disease, would send up red flags, but
a fatal car accident clearly would not. Underwriters
we spoke to agree that there must be
very solid reasons for denying a death claim. Another
option for the insurance company is to
pay a death claim equal to the amount of life insurance
you would have purchased with your
money at a smoker's rate. All
the companies we contacted stated flatly that after
a long period of time, such as 10
years, they would pay the claim. Once your policy is this
far past the two-year
contestability period, linking your death to smoking
is less important to them than not
reneging on a death claim. Don't Ask, Don't Tell
It's
statistically unlikely — but not out of the question
— that an adult will
take up smoking (most smokers start as teenagers).
That said, insurers generally don't care
if you begin smoking after the policy is issued and,
in the event of your death, would
simply pay the claim. The companies we spoke to stressed
the importance of being truthful at
the time you applied for the life insurance; they don't
expect you to let them know that
you've started smoking after your nonsmoker policy is issued. For
example, Hartford Life says that you do not have to
notify them if you start smoking
after your policy is issued — your claim would
not be jeopardized, even during the
two-year contestability period. Golden Rule Insurance
Co. in Illinois also says it's not
necessary to inform them of a "new smoking habit." Insurance Companies Aren't The Tobacco Police
Despite
insurers' diligence, there are undoubtedly smokers
who can slide through the
underwriting process undetected. If you're caught,
the worst that can happen is that your
policy will be issued at a higher rate. Insurance companies
are not the tobacco police,
after all. And the longer your policy is in force,
the less likely a death claim would be
denied. Even
so, do you really want to put your family's security
at risk just to save a few bucks
on a premium? Would they want to possibly battle out
a contested claim after your death
simply because you tried to pull the wool over the insurance company's eyes? By
Lisa Karam
Middleton
insure.com |