LIFE INSURANCE

The real cost of smoking

The real cost of smoking
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Smoking is one of the leading causes of death in Australia. The Cancer Council estimates that smoking causes 15,500 deaths per year – that’s almost 43 preventable deaths a day – and is the leading cause of lifestyle-related cancer deaths.

Yet according to the Australian Institute of Health and Welfare, almost 13 percent of Australians over the age of 14 smoke. While this rate has dropped significantly from 10 years ago when the percentage of smokers was as high as 24 percent, the average pack-a-day smoker has not been detered, spending $1000's a year on cigarettes, plus the added costs of related illnesses and higher premiums for things like life insurance.

Not to mention the price paid by the community which the Federal Department of Health has estimated at $31.5 billion in health, social and economic costs. 

Out of pocket

Not surprisingly, smokers have to pay a higher premium for life insurance and other associated insurance types than non-smokers – sometimes as much as 70 percent higher, according to xLife.

For example, xLife calculated that a 30-year-old male non-smoker would pay $557 per year for a typical life insurance policy for $1 million, whereas the yearly cost for a smoker for the equivalent policy would be $956.

Insurance companies classify a smoker as anyone who has smoked tobacco or any other substance or used a product containing nicotine – such as nicotine patches – in the previous 12 months. So even if you smoked one cigarette in the 12 months before you apply for life insurance, you will have to pay smoker rates.

However, considering how much smokers spend to maintain their habit based on an average pack of cigarettes costing $17.15, it’s not the cost of insurance that is holding them back, xLife CEO Russell Cain said.

“Non-smokers are generally more health conscious than their smoking counterparts, despite the obvious health risks of smoking,” Cain said.

“We believe this, combined with an ‘everything is going to be alright’ attitude of smokers when it comes to their health, has led to the differences in uptake between the two groups, rather than price being the sole factor.”

Risky business

Cancer is not the only health risk smokers face. Smokers also face significantly increased risk of death or illness from heart disease, stroke, atherosclerosis, abdominal aortic aneurysm, emphysema and other respiratory diseases.

Despite the higher insurance premiums, xLife’s Cain said smokers should take our cover because of the higher health risks caused by smoking.

“By not taking out cover, [smokers] are potentially placing themselves and their families at financial risk,” he said. “They should still speak to a financial adviser about taking out cover because they may find it’s not as expensive as they think.”

For information on smoking and how to quit, visit Quit.org.au or the Victorian Government's Better Health page on smoking. To calculate how much you spend, just on ciggarettes alone, visit Bupa's cost of smoking calculator.

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