John Q. Cigarsmoker, seeking life insurance, buys a $500,000 whole-life policy from insurance company A. Unfortunately, Company A is one of the many that includes the two-a-day Macanudo smoker with the two-pack-a-day Marlboro man, so John Q., 50 years old and in good health, is lumped into a general smoker category. He pays $15,000 a year for the life of his policy.
His twin brother, Bob, also seeking life insurance, shops around. He discovers one of a dwindling number of insurance companies that still recognizes the differences between cigar and cigarette smoking. He is placed in a nonsmoking preferred category, paying $11,500 a year for the same coverage as his brother. Over 20 years, Bob saves $70,000 in premiums.
"The industry is changing, and they're really cracking down on cigar smokers," says David Kleinhandler, president of Executive Benefits Group, Inc., a Manhattan-based insurance brokerage and financial planning firm for high-income clients. "There are only a few companies left that are willing to underwrite policies on a favorable basis for cigar smokers."
A number of reasons are given for the shift. There's the "me-too" factor of following industry trends, and for some insurers, says one Florida insurance agent who requested anonymity, "It's basically an opportunity to raise premiums."
Many insurers cite actuarial data about the harmful effects of smoking. Although some medical studies have shown slightly higher risks for cigar smokers over nonsmokers for certain cancers, most of the studies of smoking and cancer only address cigarette smokers. Of the studies that have included cigar smokers, most did not differentiate between a two-a-day cigar smoker and a 10-a-day smoker.
The distinction is an important one, particularly relating to lung cancer. According to American Cancer Society spokesman Michael Thun, M.D., "The risk [of lung cancer] is lower in cigar smokers than in those who always smoke cigarettes. It's directly related to the number of cigars and the duration of smoking."
The gap between cigarette and cigar smokers' overall risks is considerable. A table in the 1982 Surgeon General's report, The Health Consequences of Smoking, lists four major studies of smoking and overall cancer mortality ratios. Three of the studies--two American Cancer Society studies and a study of U.S. veterans--compared male cigarette smokers with male cigar smokers. With 1.00 being the risk level of a nonsmoker, cigar smokers had risk factors of 1.18, 1.34 and 1.32, compared to risk factors of 1.79, 2.12 and 1.97, respectively, for cigarette smokers.
Unfortunately, cigar smokers are finding themselves increasingly in the cigarette smoker category, a trend that began around 1990 and has been gaining momentum ever since. As an article in the September 21, 1992, issue of National Underwriter noted: "The industry is gravitating toward requiring that individuals not consume tobacco of any kind in order to qualify for preferred rates." Many insurers who formerly offered nonsmoker rates for cigar smokers--including State Farm Life Insurance, Primerica Life and, as recently as the end of 1994, Chubb Life America and John Hancock Mutual Life--have changed their policies and now consider all tobacco users in the same group.
The differences between smoker and nonsmoker life insurance rates are dramatic. In a telephone survey of the 25 largest and 10 smaller life insurers in the United States and Canada, insurers were asked to estimate annual premiums for a $500,000 whole- or term-life policy for a 50-year-old man. Of the companies that responded, whole-life premiums for standard smoker policies averaged $15,658, compared to $11,951 for preferred nonsmokers. First-year rates for 10-year term-life policies for smokers averaged 30 percent to 228 percent higher than comparable policies for nonsmokers.
But cigar aficionados needn't lose hope. An encouraging number of life insurers--including some of the nation's largest--still offer policies that give cigar smokers a break. "We do not consider cigar smokers to be smokers," says Joe Mondy, a spokesman for Massachusetts Mutual Life Insurance Co. At his firm, cigar smokers are eligible for insurance at nonsmoker rates. Cigar aficionados are also eligible (with certain conditions) for nonsmoker rates with Prudential Insurance, Northwestern Mutual (although a spokesman says they are reviewing their policy), Manufacturers Life Insurance Co. of Canada, Principal Mutual Life, Guardian Life Insurance Co. of America and Mutual Life Insurance Co. of New York (MONY).
A few insurers, including Metropolitan Life and Equitable Life, offer nonsmoker rates to cigar smokers, provided the client does not test positive for cotinine (metabolized nicotine) in a urinalysis test. A majority of companies now test for nicotine, particularly when large policies ($500,000 and up) are involved. The increasing use of these tests has contributed to the creation of an "all tobacco" category--cigarettes, cigars, pipes, chewing tobacco, snuff, even nicotine patches in some cases--in underwriting, because urinalysis cannot differentiate between sources of nicotine.
Industry watchers warn that restrictions and products offered by insurers will undergo rapid changes in the next few years. So the key for the cigar lover is to shop around, find an insurer that is right for your situation and lock in a favorable rate now, before the tobacco "ban" wagon picks up any more speed.
The following is a selected list of major life insurers who, at this writing, offer noncigarette-smoker rates for cigar smokers. The policies, restrictions and benefits vary widely, so consult your insurance agent for details.
Aetna Life Insurance Co
American General Life and Accident Insurance Co.
Equitable Life Assurance Society
New York, New York
Guardian Life Insurance Co. of America
New York, New York
Manufacturers Life Insurance Co. of Canada
Massachusetts Mutual Life Insurance Co.
Metropolitan Life Insurance Co.
New York, New York
Mutual Life Insurance Co. of New York
New York, New York
Northwestern Mutual Life Insurance Co.
Principal Mutual Life Insurance Co.
Des Moines, Iowa
Prudential Insurance Co. of America
Newark, New Jersey