After my last article on The Cheapest Insurance for Smokers, I had some readers ask me “Eh, how about the cheapest term insurance for smokers?” which I did not cover in that post. Okay, I heard you! I will discuss in this article if term plans is a suitable instrument for smokers to cover critical illnesses and/or death.
Critical illness TERM plan? Maybe not
If you are a smoker and looking around for critical illnesses term insurance, you are better off considering this particular whole-life plan that I have shared before. The reason being, all of the term plans that I have come across do load smokers with a higher premium than non-smokers. Hence, this whole-life plan (that does not load smokers) makes for a very cost-effective critical illness coverage for smokers. All smokers should make use of this plan!
Share with me more leh!
Okay, let’s explore using a typical commonly recommended $200,000 critical illness coverage. In the following table, the two most affordable term plans in the market (with $200,000 coverage till age 65) are compared against this whole-life plan from Company C at different ages:
If you are a male smoker aged 30 and 50, it is apparent you should not even consider using term insurance at all, because why would you pay more and not get life-time coverage?
And if you belong to the age 40 category, I will still encourage you to consider whole-life insurance even though it is slightly more expensive. For an additional amount that is less than $50 a month, you get the assurance of coverage for life. The cons about term insurance is that there is always the risk of being diagnosed with critical illnesses after the coverage ends. This could mean having to dip into our savings or retirement funds for the treatment costs or illness-related expenses.
Early stage critical illness TERM plan? Don’t even think about it lah
The premium difference is even more stark when we look at using term insurance for early-stage critical illness coverage. The following comparison uses the cheapest term and whole-life insurance with early stage CI coverage for smokers. If you are considering the term plan option, don’t – just get a whole-life plan with early stage critical illness coverage.
Note: The two whole-life plans discussed in this article are from different companies.
What if I just want to be covered for death and TPD only leh?
If you are looking at only death and total & permanent disability coverage to cover for liabilities, term insurance will be the most affordable option. I compared the cheapest term insurance for smokers with two of the more expensive term plans in the market:
Are you surprised at how much the prices can differ across the different insurers even though the coverage is the same? The difference between the most expensive term plan and the cheapest term plan in each age band is about $700 per year, which adds up to approximately $24,000 over 35 years! And that is why you should always compare plans, because the financial commitment is for the long-term.
I hope you found this short supplement to “Cheapest Insurance for Smokers” helpful. To recap:
- If you would like to get coverage for critical illness (advanced or early stage), you should consider whole-life plans
- If you would like death and TPD coverage only, term insurance is the way to go – but do compare your plans!
To find out more about the plans that were discussed, just drop me a message here. 🙂
Note: Author is an adviser with one of the largest independent financial advisory firm that partners with most of the insurers in Singapore.