How sticking to your resolutions could save you far more than just your health

Even former smokers are rewarded with much lower insurance premiums, writes Jeff Salway

IF YOU’VE made any new year’s resolutions it’s almost certain that health and finances feature prominently. What you may not realise is that by sticking to your health pledges alone you could make some serious savings.

Those whose resolutions include quitting smoking and getting fit are likely to be doing it for health reasons. But when it comes to insurance in particular you can lose the pounds in more than one way, with smokers potentially saving thousands over their lifetime if they successfully quit.

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That’s because your health is a key factor in the amount that you pay for life insurance, private medical insurance (PMI) and health cash plans. Insurers look at everything from your weight and body mass index to lifestyle factors such as smoking and drinking when working out your risk level and therefore your premium level.

Smoking is perhaps the most significant lifestyle indicator, in terms of what it adds to insurance costs. You can slash your premiums by up to 50 per cent by quitting smoking – a handy saving at a time of spiralling household costs.

Yet smokers underestimate the potential savings, according to research published this week by the NHS. The average smoker estimates that their 20-a-day habit costs them £1,800 a year, £600 less than the actual cost of smoking 20-a-day at the average pack price of £6.59. (A calculator helping you work how much money you can save by ditching the fags can be found at www.ecigarettedirect.co.uk/ashtray-blog/2011/12/quit-smoking-calculator-embeddable-widget.html) And that’s before looking at the insurance savings. Those 50 per cent premium savings could save you around £150 a year, amounting to savings of up to £8,000 over the average lifetime, if you stop smoking around the age of 30.

Kevin Carr, protection insurance specialist and managing director of Kevin Carr Consulting, said: “Giving up smoking is not only one of the most common new year’s resolutions but it can also dramatically reduce your insurance costs.

“Premiums for policies such as life or health insurance typically cost twice as much for smokers, but ex-smokers are treated as non-smokers once they have given up for 12 months. Likewise, healthy living and going to the gym can also bring a range of savings with certain insurers including PruProtect and PruHealth.” To benefit from lower premiums as an ex-smoker you need to have given up a full 12 months previously, as Carr pointed out, and that includes not using any nicotine replacement products.

More than three million ex-smokers are forking out a cumulative £316 million more a year for their life insurance than they need to, according to research last year by Sainsbury’s Finance. It found that smokers paid an average annual life cover premium of £209.75, compared with the average of £111.88 that non-smokers can expect to pay.Smoking habits and general health are factored into premiums in several ways, according to Matt Morris, senior policy adviser at insurance broker LifeSearch.

“Usually they ask questions about your medical history as well as lifestyle questions about alcohol and drug use. Your Body Mass Index (BMI) will also be used to calculate your premium. An applicant who is deemed high risk may have their premiums increased – in some cases the insurer may request a report from your GP,” said Morris.

“However, the important thing to remember is that different insurers have different rules so if you have a problematic application it doesn’t follow that every insurer will treat you the same.”

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A healthier lifestyle can also help to make private medical insurance more affordable, with some insurance policies linking premiums directly to healthy behaviour and activities. The best known is PruHealth. People on its Vitality scheme qualify for refunds on their premiums if they gain sufficient “points” against criteria measuring their health.

Members can also build up points to qualify for discounts at “health partners” including supermarkets, gyms, pharmarcies and fitness equipment groups, although it has angered some customers in the past by changing the points incentives too frequently.

Dr Katie Tryon, head of clinical vitality at PruHealth, said: “Through these Vitality points you can earn up to 20 per cent of your premiums as cash-back, up to £1,200 annual savings off a range of products and services which can be more than the cost of your private medical insurance premiums, in addition to a no claims discount if you are healthy and don’t make any claims. The more Vitality points you build up the bigger the benefits.”

Aviva UK Health now has a similar scheme – Myhealthcounts – where policyholders can get discounts of up to 15 per cent, according to factors including their blood pressure, weight and other health indicators.

While such carrot-and-stick approaches have won both awards and praise, critics claim that they lack transparency, with members left unclear as to how exactly their activity translates into lower premiums.

But whether you’re giving up smoking or embarking on a new health regime, the prospect of slashing your insurance premiums could offer valuable added incentive.