Fidelity Life: Term vs. Whole Life Insurance for Smokers

Health and lifestyle habits play a significant role in determining the premiums a policyholder will pay on term and whole life insurance policies — including smoking. Both types of policies will cost more as a smoker, but there are still unique advantages to each type of plan. For those looking for the best type of life insurance for smokers, here are the pros and cons of term and whole life insurance and how to choose the right policy. 

Term life insurance for smokers

Term life insurance is a temporary life insurance policy that only lasts for a specific timeframe, such as 10, 20 or 30 years. If the policyholder dies during the term, their beneficiaries will receive the death benefit. 

Pros of term life insurance for smokers

Here are some benefits of term life insurance for smokers:

• Cheaper: Term life insurance is cheaper than whole life insurance. Since smokers pay more in premiums than nonsmokers, a term life policy can help them save money.
• Flexible: Term life policies let the policyholder choose how long they want to be covered, which can affect their premiums — an important consideration for smokers. If the policyholder only needs coverage for a short period, they can get a policy with a shorter term and pay less. And if they need coverage for longer and are willing to spend a little more money, they can get a longer term life policy.

Cons of term life insurance for smokers

Term life insurance for smokers also comes with drawbacks, such as:

• Temporary coverage: Term life policies expire after a certain timeframe. If the policyholder outlives the policy term, they'll have to get another policy to maintain coverage.
• Premiums increase with the next policy: If a policyholder's coverage expires, they can get another policy, but they may pay higher premiums than last time due to age and any potential health problems that developed since then.

Whole life insurance for smokers

Whole life insurance offers the policyholder lifelong coverage as long as they continue to pay premiums. It also contains a growth component called the cash value, which can accumulate tax-deferred over time.

Pros of whole life insurance for smokers

Whole life insurance for smokers comes with many benefits, including:

• Lifelong coverage: Whole life policies last for a lifetime. As long as the policyholder pays premiums, their beneficiaries will receive the death benefit no matter when the policyholder dies.
• Cash value: Whole life insurance has a cash value component that part of each premium goes into. The cash value grows tax-deferred at a fixed rate. When large enough, it can be used to:
• Withdraw from the policy: Policyholders can take money out of the cash value but may owe taxes on gains.
• Borrow from the policy: Policyholders can get a low-interest-rate loan with no credit checks. They can leave it outstanding, as long as it's smaller than the remaining cash value.
• Surrender the policy: Surrendering the policy lets the policyholder receive their cash value minus surrender charges.
• Lock in rates: Many whole life policies let the policyholder lock in premiums. If the policyholder started smoking after getting their policy, they may not have to pay more.

Cons of whole life insurance for smokers

Here are some cons of whole life insurance for smokers:

• High premiums: Whole life insurance policies are already more expensive than term life policies. Smokers may deal with even higher premiums to pay for the lifelong coverage and cash value component.
• Harder approval: In many cases, getting approved for a whole life policy can be harder for smokers. They may have to spend more time shopping around.

Should smokers get term or whole life insurance?

Term and whole life insurance policies offer unique advantages and disadvantages to smokers.

Term life policies are cheaper and more flexible overall, but they won't provide the policyholder with lifelong coverage. Plus, if the policyholder wants another policy when the first expires, premiums may cost more. Whole life policies offer guaranteed lifelong coverage and a cash value component to build wealth, but they're more expensive and harder to get approved for as a smoker. 

Ultimately, smokers should weigh their budget against the pros and cons of each policy. Since there's a lot to sort through, it can be wise to work with a licensed insurance agent to help them get the coverage they need at a good rate.

For all media inquiries, contact: 

Laura Zimmerman, Chief Marketing Officer

laura.zimmerman@fidelitylife.com, (312) 288-0068