2021 Q&A
If the last year has taught us anything it is just how fragile life can be, highlighting the importance of having comprehensive financial protection for our loved ones.
Life insurance is simply a financial safety blanket which can cover your mortgage repayments, family living costs, household bills, childcare costs and provide an inheritance, if you are no longer around to provide.
But how do insurers in the UK view the growing number of applicants who now vape instead of smoke? We asked leading life insurance broker Reassured to help answer some of the most frequently asked questions they were asked in 2021.
If I vape, will I be classified as a ‘smoker’ by an insurer?
Generally speaking, if you have smoked or used any replacement products within the past year, an insurer will classify you as a smoker. Surprisingly for many, this currently also includes the use of vapes, e-cigarettes, nicotine patches and gum.
As a result, an applicant who smokes cigarettes will often be charged the same monthly premium as someone who vapes.
But why?
This is thought to be because insurers simply do not understand the long-term effects of vaping on your health and wellbeing, despite research suggesting that in fact vaping is approximately 95% less harmful than smoking – (source: https://www.gov.uk/government/news/e-cigarettes-around-95-less-harmful-than-tobacco-estimates-landmark-review).
But things do appear to be changing within the industry as underwriters acquire a greater understanding of the health benefits over smoking, with certain specialist insurers entering the marketplace.
Newcomers Reviti recently announced they are offering vapers a sizeable 15% discount on life insurance premiums compared to smokers’ applicants.
There is also Moneyworth, who claim to quote vapers up to 50% off if you have not smoked for a year or more. Finally, there is Future Proof Insurance too who offer reduced quotes for those who vape over smokers.
So, as the life insurance sector evolves, and insurers do more to attract the 3m UK vapers, underwriting processes are changing too. Good news for vapers.
Will you be asked if you vape during the application?
Yes, it is highly likely you will be asked if you vape during the application process.
Whilst it can be tempting to lie in order to secure a lower premium it is vital that you are open and honest with all your answers.
If you wrongly state that you are a non-vaper it could invalidate your policy and result in an unsuccessful claim. This would render your selfless investment a complete waste of time and money. More importantly, it could also leave your dependants financially vulnerable.
But how would an insurer know if I vape or smoke?
Believe it or not, if you were to pass away, an insurer could evoke a contestability clause to establish if the cause of death was related to your habits.
An insurer also has the right to request your medical records to gain a greater understanding of your medical history.
As part of the application, an insurer may request that you undergo a medical exam or take a cotinine test to establish if you smoke/vape.
Insurance giant Legal & General are estimated to screen up to 20% of their life insurance applicants.
What about nicotine-free vaping?
The exception to the above, can be with nicotine-free vaping, as some insurers only ask questions relating to products which contain nicotine. In this scenario, you could correctly be classed as a non-smoker.
Vapers take note – Always compare multiple quotes from different insurers
Every insurer has a different underwriting criteria, and even their classification of what constitutes a smoker can differ, so it is vital to compare multiple quotes from different providers as costs can vary wildly.
A life insurance term can last up to 40 years, so making sure you secure the most cost-effective premium is vital as over the lifetime of a policy a small saving could equate to a significant sum.
A convenient way of comparing quotes is to use a reputable comparison website, however their panel of insurers rarely includes the smaller specialists who may quote you the more favourable rates.
Another good option is to use an FCA regulated life insurance broker, who can compare a wider panel of insurers, as well as guide you through the lengthy application process, answering any insurance jargon.
A broker can also use their experience to match you with the insurer most suited to your needs, as well as write your policy in trust (free of charge) to avoid 40% inheritance tax and probate. (When a policy is written into trust it does not form part of your estate and therefore is not subject to IHT).
How much does smoking affect life insurance?
Smoking has a significant impact on the cost of your life insurance. Along with your age and medical history, it is probably the most influential factor. Furthermore, this hiking of monthly premiums for smokers accelerates as we get older. Another reason to give up cigarettes and transition to vaping, whether this be a long-term change or as part of your journey to quit altogether.
Life insurance premiums are calculated based on the level of risk you pose to the insurer and as we age statistically our health risks increase.
The table below displays how much more a smoker will pay vs a non-smoker and how the cost escalates as we age. The prices quoted are based on a level term life insurance policy with £100,000 cover, over 20 years.
How are nicotine-free vapes classified?
Certain insurers will only ask whether you use nicotine products during the application.
Therefore, you will not need to declare your vaping habits at all. Although, this is not always the case with every provider, so it is important to read all questions and small print carefully.
Again, the key is to shop around and compare quotes, because insurers underwriting criteria and classifications can vary.
Does switching from smoking to vaping affect life insurance?
Insurers generally require you to have changed your habits for a minimum of 12 months before they would consider a re-classification of your status.
For example, if you smoked but have quit completely, an insurer will only regard you a non-smoker after you have abstained for at least 12 months, (although this threshold varies depending on the insurer).
If you have an existing life insurance policy and were a smoker at the point of application, but have made the switch to vaping, it is worth calling your insurer to inform them of your new status. On occasions, they may consider reducing your monthly premium, as you pose less of a risk.
Alternatively, it may be more cost-effective to cancel your existing life insurance and take out a new policy with your vaper or non-smoker status.
What if I start vaping/smoking after I’ve taken life insurance out?
If you start smoking during your policy term you are not obligated to inform your insurer as your premiums are confirmed by your position at the point of application, however it could be in your best interest to do so.
If you started smoking and pass away within the first two years of the policy, an insurer has the right to investigate your passing.
In summary
In truth, the life insurance industry has been slow in adapting to the emergence of the vaping revolution and insurers, somewhat lazily, grouped vapers together with smokers.
However, this appears to be changing with the emergence of smaller specialists, like Reviti Life Insurance and Moneyworth, offering reduced premiums for vapers over smokers.
The key takeaways from this article for vapers are;
- Always compare quotes from a range of insurers to secure the best available quote
- If you have life insurance and switch from smoking to vaping, inform your insurer
- Consider using an FCA regulated broker to save time and money. They can also help with your application and write your policy in trust (to avoid 40% inheritance tax)
- If you use nicotine free vapes ask your insurer how you would be classified
- Be open and honest during the application process
By making the switch to vaping, there are significant health benefits and ultimately this is the most important thing. Thankfully, it finally seems that life insurance is finally moving with the times – why not seize the day and secure your loved ones financial future?
