State Farm Insurance, the fourth largest life insurance provider in the United States, has more stringent guidelines when defining smokers and nonsmokers, a policy that is more typical in the current market. State Farm, according to spokeswoman Ana Compain-Romero, draws the line at one cigar per month to be eligible for a nonsmoker rate. Anything more than that and an applicant would most likely be lumped in with cigarette smokers and subject to a higher rate than nonsmokers.
The reason, Compain-Romero said, stems from the rush of cigar smoking during the cigar boom of the mid-1990s. "There was an upsurge, and it became very hip and popular to smoke stogies like your grandfather or father did, and our underwriters were faced with looking at that and defining some terms," said Compain-Romero. The policy remains the same today as it did then, and prior to 1990 there was no variable accounting for cigar smokers.
Northwestern Mutual Life Insurance Co., the largest provider of individual life insurance in the United States, used to be more cigar-friendly, but now shares a policy similar to State Farm's. "We still make an exception for cigar smokers," said Kurt Carbon, a spokesman for Northwestern Mutual. "Those that smoke 12 or fewer cigars per year are still eligible to get non-smoker policy rates; 13 or more get smoker rates."
A 1995 article in Cigar Aficionado listed 11 cigar-friendly life insurance providers that offered non-cigarette smoker rates to regular cigar smokers. We called them recently, inquiring about insurance rates, and found some of them to be less cigar-friendly than before. Metropolitan Life Insurance Co., Mutual of Omaha and Guardian Life Insurance Co. told us they did not offer non-cigarette smoker rates to cigar smokers. State Farm and Northwestern, who were also on the 1995 list, will only accommodate cigar smokers who stay under the one-cigar-per-month limit.
Carbon says that there are no real specifics to point to regarding the change in policy. "We decided that there was some additional risks in the use of tobacco products, whether it be chew or pipes or cigars." Carbon does not cite one study as the cause but attributes the accumulation of different studies during the past few years reporting increasing risk that lead to the change in policy.
Robert Flood of Flood Insurance Co., a property, casualty, life, accident and health insurance agency based in New York, says that it comes down to business. Companies provide insurance to cigar smokers and other tobacco users under a nonsmoker rate because doing so can be mutually beneficial to the company and the client. "It's an aggressive stance by the company saying, 'We think we can write enough policies and generate enough premium that we can accept the increase in our claims payments as a result of cigar smoking.' "
It is not only the larger insurance companies that can take on the potential additional financial burden. "Allowing cigar smokers under a nonsmoker rate "could make sense for a smaller company in order to grab a greater percentage of the market share," said Flood. The same could also be true of a larger company.
For years, before the advent of blood and urine tests, many people would play the odds, said Udell, reporting themselves as nonsmokers when they were in reality smokers. If the insurance company ever found out, they or surviving relatives would have to make up the difference between what was not paid on the smoker's insurance. Once companies caught on, they started screening for nicotine; many smokers promptly said they were cigar smokers to account for the nicotine in their systems, and were thereby excused from cigarette smoker rates. Finally, catching on to this, insurance companies amended their plans and grouped all smokers into one big, fuming heap.
Companies now employ tests using a cotinine screening. According to the Centers for Disease Control and Prevention, "cotinine, a major metabolite of nicotine, is currently regarded as the best biomarker in active smokers and in nonsmokers. Cotinine persists longer in the body than nicotine and can be measured in serum, urine, saliva and hair."
The parameters for frequency of tobacco use for a most insurers are determined by the results of the cotinine testing. State Farm and Northwestern, for instance, formulate the 12-month rule because this is the increment that keeps nicotine low enough in the body so as not to show up on the cotinine test. Any trace of nicotine in the body will land cigar devotees in the smoker category at these two companies. Compain-Romero said that these tests, combined with verbal data are enough to classify an applicant as smoker or nonsmoker.
Carbon said there are two big problems when it comes to this subject. "There are no really good studies in clinical medicine about when the negative effects of tobacco really begin…and no good way to measure the amount of tobacco an individual uses," he said. The cotinine tests are good but can sometime yield questionable results.
"A person who is a light smoker could test after a day of not smoking as lightly as a person who just had their one cigar per year." Conversely, if a person smokes one cigar the day before an exam, they will test positive and most likely be grouped with smoker rates regardless of the frequency of use of during a year's period.
Still despite all the testing and policy making, there is a loophole in most policies that doesn't discriminate between cigarettes and cigars, which is referred to as a two-year "incontestable clause." This means that a company can challenge and deny a claim within two years after the policy was initiated. For instance, if an applicant were to lie about cigarette smoking then die of lung cancer within two years of having initiated the life insurance policy, the insurance company could nullify the claim or demand that the difference in premiums is paid. If the policyholder were to die after two years, the company would have to pay the claim.
"After ten years or so, linking your death to smoking is less important to the [insurance companies] than not reneging on a death claim," according to a report from Insure.com.
Once you do the research and find the right company for you, Udell says, "as long as you don't lie, the companies will always pay."
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