Mind Your Money: Quit smoking and lower your insurance premium

In the UAE, where a progressive mindset towards health and wellness is gaining momentum, insurance providers are increasingly incentivising policyholders to adopt healthier lifestyles

By Anselm Mendes

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Published: Mon 19 Feb 2024, 11:36 PM

In the new year, many of us embarked on the journey of self-improvement, setting resolutions that promise a healthier, wealthier, and happier life. While gym memberships and diet plans often take centre stage, there's a resolution that could significantly impact your health, as well as your financial well-being: Quitting smoking. Beyond the obvious health benefits, kicking the smoking habit could unlock unexpected financial advantages, particularly when it comes to your insurance premiums.

From a financial planning perspective, let's examine the lesser-known connection between quitting smoking and reduced insurance premiums, specifically in our dynamic Middle Eastern landscape. So, how does smoking impact your insurance premiums and quitting adds extra dirhams to your pockets?

Let's start with a cold, hard fact

Smoking poses a significant risk to your health, and insurers are acutely aware of this. Around the world, insurance companies factor in lifestyle choices, like smoking, when calculating insurance premiums. Vaping, chewing tobacco, hookah, chewing nicotine gums, and using nicotine patches, too, are considered as risky as smoking by many insurers. So, these habits can adversely affect not only your ability to get insurance coverage but also the amount charged for the same.

Did you know that smokers are charged higher premiums compared to their non-smoking counterparts? It's not just a matter of health; it's a matter of risk management for insurance providers. According to recent studies, smokers are statistically more likely to make claims related to critical illnesses, leading to a higher financial burden on families. Smokers are also more likely to have shorter life expectancies, leading to insurers attributing higher risks to them.

The financial ripple effect

As an advisory firm to families globally, we’ve witnessed firsthand how seemingly unrelated decisions impact one's overall financial portfolio. Quitting smoking is a good example of a decision that creates a positive financial ripple effect. When you stop smoking, not only do you save money on cigarettes, but you also position yourself for reduced insurance costs.

Consider this: A non-smoker may pay up to 50 per cent less for life and health insurance premiums compared to their smoking counterpart. These savings can add up significantly over the years, creating an opportunity to invest in wealth-building instruments or simply enjoy a higher disposable income, in addition to a healthier lifestyle.

In the UAE, where a progressive mindset towards health and wellness is gaining momentum, insurance providers are increasingly incentivising policyholders to adopt healthier lifestyles. Smoking is their prime target due to its direct correlation with a myriad of health issues, including heart disease, respiratory problems, and cancer.

According to a survey conducted by the Ministry of Health and Prevention in the UAE, smoking-related illnesses contribute to a significant portion of healthcare expenditures. Insurance companies, in turn, pass on these costs to policyholders, creating a direct link between lifestyle choices and financial implications.

Unlocking savings: A financial perspective

Let's break down the potential savings. If you're a 35-year-old smoker in the UAE, you would be paying an extra 30-50 per cent on your life insurance premium compared to a non-smoker. In most cases, the added costs will border on the 50 per cent mark. For smokers with existing policies, depending on the insurer, quitting the habit can lead to a reduction in premiums after a waiting period ranging from 12-60 months as a non-smoker.

Over a 20-year policy term, this seemingly modest difference could translate into thousands of dirhams in savings. Now, imagine redirecting these savings into a diversified investment portfolio or using them to bolster your retirement fund. The financial possibilities are as vast as the desert landscapes that surround us.

As you contemplate your New Year's resolutions, consider the financial wisdom of quitting smoking. It's not only a pledge for better health but also a strategic move towards a more robust financial future. The statistics speak for themselves, showcasing the tangible benefits of this resolution, not just in terms of health but in the realm of wealth management.

Quitting smoking could be your gateway to lower insurance premiums, reduced healthcare costs, and enhanced financial well-being. As financial advisers, our advice is clear: Take charge of your financial destiny by extinguishing that last cigarette and lighting up a brighter, healthier, wealthier future.

Anselm Mendes is the Executive Director, Sales and Technology, The Continental Group

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