Picture: 123RF/DOUW DE JAGER
Picture: 123RF/DOUW DE JAGER

One of the most popular new year’s resolutions is to quit smoking. Besides the obvious health benefits, the amount of money you can save over decades is eye-watering, with some people describing quitting smoking as giving yourself a salary increase.

The savings are many-fold. First, the amount of money you will save on life insurance premiums as a non-smoker is no small fry. Then there is the saving from frequent visits to the doctor for illnesses linked to smoking.

To demonstrate the hard cash burden of smoking, if you were to invest every cent you spend on packets of cigarettes into a simple savings account, the returns over a decade or more are enough to fund a dream holiday. Park that money in a more tailored and aggressive investment vehicle and you could be looking at millions over the course of three or four decades.

Of course, this is an academic exercise, but what it demonstrates how much more you could save by kicking a simple habit that has become part of your ordinary existence.

It is important to note that one typically cannot change your status from smoker to non-smoker, meaning you are locked in with set premiums

Let’s say you smoke a box of Benson & Hedges a day that costs R30. Over 10 years you will have saved almost R110,000 in cigarette purchases. If you placed that money into a savings account that returned 6% per annum, you would earn roughly R40,000 in interest, bringing your 10-year no-smoking savings bonus to about R150,000. Anyone fancy a cruise to Hawaii?

Healthy returns

Back to the serious business of why you should quit — your health and the related savings on your life premiums.

There is no longer any debate about whether smoking can kill you. The link between smoking and cancer is well-documented, and the link between smoking and a host of other health problems such as heart disease is also well known. Someone who smokes is at a much higher risk of dying prematurely.

Life assurers know this, and that is why in their underwriting process a smoker pays a far higher penalty. 

Jonathan Elcock, founder and CEO of CompariSure explains it like this: “Imagine two houses, both worth R2m. One is in a city that’s never had an earthquake or flood, while the other is in a city known for having earthquakes and is close to a river prone to flooding. The owner of the house in the risky city will understandably be charged a higher premium to reflect the higher risk on what is being insured. The same applies to people, given the fact that we are all different.”

Comparing smokers with non-smokers

Elcock put together an analysis of three well-known South African insurers. He got estimated quotes for R2m life cover for a 40-year-old male office worker with a matric, earning R30,000 per month.

Graphic: CompariSure
Graphic: CompariSure

Assuming this person had gone with Insurer B, Elcock highlights that his  premium will be R284 a month more, or just under R3,500 more, in the first year. “Let’s assume he pays his premiums until age 75 then dies, and assume premiums go up by 5% every year. The total extra amount he will have paid is just over R300,000. And now assume it wasn’t R2m cover, but R10m cover: you can easily end up paying millions extra for being a smoker.”

It is important to note that one typically cannot change your status from smoker to non-smoker, meaning you are locked in with set premiums. 

“Insurers, however, do vary in this regard, so it’s always best to ask whether it is possible to change to non-smoker status on quitting or, alternatively, look at switching to a new policy altogether,” he says.

Quit for good

It would be foolish to think you could trick your life assurer. Stopping for a week, a month of even three months is irrelevant. You would need to have stopped smoking for at least a year to be considered a non-smoker for underwriting purposes. It is always advisable to speak to your broker and get an understanding of all the permutations. 

South Africans received a collective lesson in non-disclosure and honesty and transparency when providing information during the underwriting process when the Nathan Ganas saga unfolded with Momentum. Quit for real, make the lifestyle change. Be honest and be healthy. 

Insurance companies can and do test for smoking. Tests conducted return cotinine levels: cotinine is present in nicotine. Obviously tests are designed to take into account passive smoke but the presence of the chemical indicates a smoker — and there is no such thing as casual smoker. You either smoke or you don’t and your premiums are affected accordingly.

Life assurers rejected R1.13bn worth of “fraudulent and dishonest claims” in 2017, with dishonest death claims more than doubling in value from 2016, according to the industry body representing insurers in SA. Fraud seldom pays and is always unethical. It’s far less risky to quit smoking than to pretend you have.

So decide to quit. Stick to your decision. Save the money you would have spent on cigarettes, and after a year of not smoking speak to your life assurer and look at your options for saving on your premiums.

This is one new year’s resolution that will not only benefit your health, but also your bank account. Now, let’s start planning that cruise to Hawaii.