Give up tobacco on No Smoking Day to save £1,000sCut the cost of insurance by giving up cigarettes

14 March 2012


You can get cheaper life insurance by giving up smoking

Giving up smoking won't just help your health, it can also put thousands of pounds a year back into your wallet. We explain how you could save money this No Smoking Day, 14 March 2012.

The financial benefit of giving up cigarettes

A 20-pack of Silk Cut Purple costs around £7 at Tesco. If you smoke 20 a day, that's as much as £2,555 a year. Put the money into a 3% Best Rate cash Isa each month and you'd earn an extra £50 in interest in the first year, too.

Even if you smoke five a day, that's £639 a year you'd save by giving up smoking, plus an extra £10 in interest.

Life insurance for smokers

A 55-year-old male smoker buying a £100,000 life insurance policy over a 10-year term could pay around £41.20 a month for the cover.

If the same man was a non-smoker (or had been tobacco-free for 12 months), he'd pay just £16.89 a month. Over the 10-year term, that's £2,917 less in premiums.

If he'd put the monthly difference into a Best Rate cash Isa paying 3%, he'd have almost £3,400 in the bank at the end of 10 years.

Income protection, private medical insurance and critical illness cover

It's not just life insurance premiums that usually fall 12 months after you give up smoking. Most insurance policies that are based on your health are more expensive if you smoke. Insurers charge smokers more as they're more likely to fall ill or be unable to work, and therefore to make a claim. This affects anyone buying income protection, private medical insurance (PMI) or critical illness cover.

Even home insurance can cost more for smokers with some providers because of the increased fire risk.

Ex-smokers could save by switching

If you took out a life insurance, income protection or PMI policy when you were a smoker, but have now been tobacco-free for 12 months, you could save money by switching to a policy for non-smokers.

It's best to take independent financial advice to make sure you're not giving up any valuable guarantees, but many people could save. You often don't even have to switch to a new insurance provider.

Smokers and buying a pension annuity

There is some good news for smokers. When you approach retirement and want to turn your pension pot into a regular income, smokers can often get a much better deal through buying an enhanced annuity.

An enhanced annuity pays a higher annuity rate to people with particular lifestyles, including smokers and obese people. As smokers are more likely to die early, annuity providers are willing to pay out more each month while you're alive.

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