E-Cigarettes, Personal Vaporizers or Electronic Nicotine Delivery Systems are a few names to describe a fast growing alternative to traditional cigarettes. In fact growing so fast, Life Insurance companies are taking note!
For better or worse, E-Cigarette use has seen strong uptake in Australia mirroring the 300% – 500% growth seen in the UK and US.
The legality of E-Cigarettes vary from state to state in Australia with some states banning their use1 and some allowing their use, but not for nicotine products. But everyone knows just because it is not allowed doesn’t mean it is not happening.
Although marketed as a ‘stop smoking aid’ Electronic Cigarettes when used with nicotine products provide the same chemical, nicotine, that cigarettes provide and this is where the concern lays with Life Insurance companies.
Many Life Insurance companies are looking very closely at this ‘habit’ and some insurers including CommInsure have already made the determination that E-Cigarettes constitute ‘smoking’2 under their policy terms. What does this mean? If you smoke E-Cigarettes, you will probably pay ‘smoker’ life insurance premiums regardless if you smoke traditional cigarettes or not.
E-Cigarettes don’t cause cancer like cigarettes – so why do I need to pay more?
Nobody will dispute that traditional cigarettes cause a whole lot of health problems and life expectancies are significantly lower and as such, life insurance premiums higher. There is dispute however around the health effects of E-Cigarettes. Health reasons aside, this is not the only problem to a life insurance company.
E-Cigarettes cause two other issues to Life Insurers; activity and addiction. Insurance companies don’t like smoking and are more cautious of previous smokers who treat themselves as ‘non-smokers.’ Not because they start getting healthier, but because the risk that a person starts smoking again is very high. Once a life insurer prices someone as a non-smoker, it is difficult to increase their premium as a smoker.
Enter E-Cigarettes…. The chances of an e-smoker taking up traditional smoking is much higher than a non-smoker because they are conducting the ‘act of smoking’ via the e-cigarette. The fact also that ‘e-cigarettes’ deliver nicotine (whether this is illegal or not) keeps them awake at night. Nicotine may not cause health problems, but nicotine is one of the most additive chemicals in the world that is shared by one of the most toxic products known – Cigarettes.
In the case of E-Cigarettes, it is not the case of known health issues, but the increased (and likely) case that an e-smoker is or will become a smoker. Because insurers only get one chance of underwriting an application, they need to take a long term conservative approach.
What if I already have a Life Insurance Policy?
Well your basically a lucky duck! Under what is called a persons ‘Duty of Disclosure’ under the Life Insurance Act, your duty to disclose additional risks to the insurer basically stops when your accepted by the insurer. So if you have an existing life insurance policy and randomly decided to pick up e-smoking’ then you do not need to tell your life insurer and you can keep paying non-smoker rates. Be aware however if for what ever reason your policy lapses or you change insurers, you may have to disclose your e-habit and pay a higher premium as a result!
Will all Life Insurance companies make me pay more?
That may be the million dollar question – at the moment only a handful of insurers have changed their guidelines, so act fast! Find a good financial adviser or life insurance comparison service to do the leg work for you. Once you have cover accepted (and have told the insurer the truth, the whole truth and nothing but the truth, so help me claim assessor), you have that cover as long as you need it without the insurer altering the terms of the policy. Not sure where to start? Let us Life Insurance advice partner help you get the right cover!
About the Author – The Money Geek
The Money Geek is the head money blogger for MoneyGeek.com.au. With over 8 years experience in the finance industry, the Money Geek provides information over a range of topics to help families Australia-wide improve their financial literacy to become their own geeks and take control of their financial future!