My friend and I are in the process of considering term insurance, and a major point of concern for us is regarding smoking and drinking. Every broker has asked us whether we smoke or drink. One of us is a smoker who smokes almost daily, while the other person drinks occasionally on weekends or skips it altogether. We are curious about the consequences if someone lies about their smoking habits on their term insurance application. Is this a serious issue that could potentially void the policy?
Contrary to common assumptions, individuals who smoke and drink alcohol are eligible for health insurance in India. While some insurance providers may have certain restrictions in place, the majority of companies do extend coverage to such individuals. It is important to note that consuming alcohol does not automatically result in rejection of your insurance application.
Mainak Adhikary, Head of Operations, Go Digit Life Insurance, shares his response on this aspect of term insurance.
Term insurance is a type of life insurance policy that provides coverage for a specific period, referred to as the “term” of the policy. It ensures financial security for the policyholder’s beneficiaries by offering a payout in the event of the policyholder’s death during the coverage term. Term insurance does not build cash value over time. Its sole purpose is to provide a death benefit to the beneficiaries, ensuring financial support in the event of the policyholder’s passing.
Term Insurance is the most essential insurance cover that everyone should consider. It is good that both you and your friend are considering buying a Term plan and are asking all the right questions. Many people have concerns about purchasing term insurance, especially if they don’t lead a particularly healthy lifestyle.
If you or your friend are considering term insurance, it’s crucial to be honest about your smoking or drinking habits during the application process. As per IRDAI guidelines, misrepresenting or withholding information about smoking or drinking is a serious issue. Failure to disclose such details is considered fraud and can lead to the policy being void.
Hence, make sure you fully disclose and answer all the health-related information as accurately as possible. If one of you has quit smoking, insurers may classify you as a non-smoker after a significant period (typically 12 months).However, the classification period may vary from insurer to insurer. Being marked a non-smoker can potentially reduce your future premiums. However, full disclosure of past habits is essential.
Starting to smoke after the Term Life policy has been issued to you generally does not affect the validity of the current policy. However, it is advisable to inform your insurer of any type of lifestyle changes. Non-disclosure may impact future claims or renewals. AlsoAlso, future policies or renewals will require disclosure of your current smoking or drinking status, which may lead to higher premiums.
Lastly, the notion that being marked as a smoker reduces your chances of claim settlement is inaccurate provided you were truthful during the application or policy-buying process. Being marked as a smoker results in higher premiums but it neither inherently lowers the chances of you being issued a policy nor your claims not being paid. Claims are processed according to the policy terms. Honesty is the key to avoiding claims-related issues down the line.