In this video, we’re going to look at a strategy that can help smokers who are planning on quitting save substantially in the earlier years of their policy.
Now typically what you might think of doing is purchasing something like a term 20 policy at smoking premiums and then once you qualify at nonsmoking premiums go through the paperwork, reduce the policy down to nonsmoker premiums. So you pay smoker premiums for a couple of years then you drop it down and now you’re paying nonsmoking premiums for the duration of the policy.
There’s a better way.
Instead of purchasing a term 20 initially, we purchase a term 10 policy which will have much cheaper premiums in the early years of the policy but for the same life insurance coverage. Once you qualify at nonsmoking premiums we do two things.
Number 1, we re-qualify you down to nonsmoker rates. So now you’ve got a nonsmoking term 10 policy which isn’t what we want – we want a term 20 policy. But then we use the exchange option at the same time to bump you out to a term 20. Net result, instead of paying term 20 smoking premiums in the early years of the policy, you’re paying term 10 and saving substantially. So it’s a much cheaper strategy for the same end result.
Let’s look at cigarettes first. One cigarette a year will qualify you at smoking premiums. Any cigarettes at all and you’ll be looking at smoking premiums.
In terms of marijuana, if you use a low amount of marijuana occasionally or recreationally then many life insurance companies in Canada today will actually qualify you at nonsmoker premiums. But if you cross their limits then they’ll again consider you a smoker.
The last three are kind of in a group. It’s pipe, cigars, and cigarillos. Most companies will consider you a smoker if you smoke even one of those at all. There are occasional exceptions that are very company dependent. If you’re a cigar smoker and very occasionally, so if you smoke one or two cigars a year on the golf course, then some companies will qualify you at nonsmoker premiums but any use above that will qualify you at smoker premiums.