Stop smoking, save money

Kirstie Redford from 20.06.07

Smokers beware: lighting up a cigarette in a pub will cost you more than your health from next month. The ban on smoking in public places comes into force in England on 1 July and if you're caught you could be fined £50.

If you are a smoker then the news may not be that appealing. But if the thought of having to huddle outside to get your nicotine fix is still not enough to persuade you to give up, then perhaps a financial incentive could.

The savings that can be made by simply not buying cigarettes are widely quoted. Figures from Clerical Medical claim the average British smoker spends £1,500 a year on tobacco, which adds up to - excuse the pun - a breathtaking £92,000 in a lifetime.

Cheaper life cover

However, if you kick the habit this is not the only money you will be saving. If you have life cover, critical illness insurance or income protection you may be able to switch to a cheaper rate. According to figures from Moneyfacts, these savings could be substantial. For example, a 40-year-old male with a £100,000 term assurance policy with critical illness would save, on average, £65.68 a month if he gave up smoking. The same person with income protection cover for £250 level benefit a week would save a further £7.84.

To qualify for a non-smoker's rate, insurers generally ask you to be tobacco-free for 12 months - which also includes nicotine replacement therapy.

Kevin Carr, head of protection at LifeSearch, says that the biggest savings may not necessarily be with your current insurer, so you should always shop around. "There can be variations each day in the rates on offer from providers. No one insurer is ever best for everyone," he says.

Swapping to a non-smoker rate means filling out a new application form and declaring your most recent medical history. If you have suffered a serious condition since you first took out your cover, this could unfortunately mean extra loadings on your premium. If these match or outweigh the savings that you can make from being a non-smoker, Carr says that changing your policy may not be the best move.

Ex-smokers

However, if you haven't suffered any major health problems, big savings can be made. Carr says that a married couple approached LifeSearch two years ago to buy life cover and critical illness for their new mortgage. "While she had never smoked, he was a regular smoker when they first contacted us. Eight months into the original policy they contacted us to say that he had now given up smoking, so we advised that after 12 months ex-smokers are considered to be non-smokers and that we would contact them again in a year's time, which we did," says Carr.

The couple had taken £120,000 of level term assurance with critical illness cover over 22 years, which was costing £152.70 a month with Legal & General. After the switch, Carr says they are now paying £89.23 a month with Scottish Equitable - a saving of £15,995 over the remaining 21-year term.

Private medical insurance

Another type of insurance where you could see some savings for giving up smoking is private medical insurance (PMI). Although most insurers do not provide a significant non-smoker discount, there are some that may be able to help you save a few pounds.

Stephen Walker, director of specialist PMI broker Medical Insurance Services, names BCWA Healthcare, Freedom Healthnet and PruHealth as insurers worth approaching. "With BCWA, you can call them 12 months after you have given up smoking and request to be transferred onto a non-smoking rate, which could save around 5% on your premiums. With Freedom Healthnet, you can save around 6%," he says.

According to industry research BUPA and AXA also provide slightly lower rates for non-smokers.

However the biggest savings are likely to be with PruHealth, which claims to provide a discount of up to 30% for non-smokers. PruHealth is different to other health insurers as it provides 'vitality points' for policyholders who take steps to live a healthier life, such as going to the gym or giving up smoking. The more points you earn, the bigger the discount you receive.

If you're a smoker and decide to give up, PruHealth also tries to incentivise you to stop by providing 50% reductions on Alan Carr's smoking cessation programme.

So if you decide to quit smoking this summer, don't forget to check out how much you could save. It could be just the incentive you're looking for to kick the habit for good.