INSURANCE COMPANIES offering life products specialise in calculating risk and deciding who they will insure and at what cost. Insurance underwriters use 'mortality tables' in the drawing up of policies. These tables show the average lifespan of a proposer, help calculate their premiums to cover the risks, and show the profit for the insurance company. Most insurance companies take a calculated approach to issuing life insurance policies to applicants who suffer from illnesses, or whose pastimes include, for example, scuba-diving, flying a private aircraft or rock climbing, activities that are regarded as 'risky behaviour'. Different criteria are applied to smokers, who are heavily penalised for their habit. In some cases, smokers pay up to four times as much for the same level of coverage as non-smokers. Unless they are alcohol dependent or suffer from an alcohol-related illness, people who drink alcohol are not penalised. Karen McIntosh, regional general manager of products at CMG Asia, said people were a 'risk' in the eyes of life insurance companies, whether they considered it or not. 'If you are like most people - you're not an Olympic athlete but you don't have serious health problems - then you are probably what insurance companies call a 'standard risk'.' Individuals classified as standard risk qualify for a life insurance company's standard rates. If the applicant is of better-than-average health, they may be considered a 'preferred risk' and qualify for lower rates. The proposed amounts on the life insurance quotes will be affected by the level of risk. 'Smokers are considered to be high risk because there is a great deal of evidence that points to smoking-related illnesses becoming a problem in later life,' Ms McIntosh said, adding that applicants in their 20s who smoked would be charged more than applicants who did not smoke. Ms McIntosh, who has practised as an actuary, assembling and analysing data to estimate the probability and likely cost of events such as death, sickness, injury and disability, said individuals with debilitating health problems could obtain life insurance but there could be clauses. For example, if an applicant had a complex medical history, the underwriter might ask for higher premiums for his or her policy. A medical condition can be stable, reducing or increasing, and the underwriter will apply the terms accordingly. This applies to those with illnesses such as cardiovascular disease, stroke, diabetes, cancer and multiple sclerosis. An insurance company will rarely refuse an application; however, the loadings and areas that are not covered may make the policy unrealistic. Ms McIntosh said that lifestyle choices could be made to lower life insurance quotes, such as quitting smoking, lowering cholesterol or losing weight. Most companies will adjust the policy loading to a preferred status if lifestyle improvements have been maintained for two years. Ms McIntosh said these were general examples as each life insurance company had its own standards when preparing quotes. If a medical condition presents a reducing risk, an individual may apply for a With-Profit Endowment Policy. This guarantees a minimum sum on death and profits are added when the policy matures. However, the underwriter might impose a reducing debt of 50 per cent. If the initial cover is $10,000, for example, and the client dies the following day, the policy will pay only $5,000. The payment will remain at $5,500 until the end of the policy term, when the full minimum sum assured will be paid and the With-Profit Endowments will be added. Many companies offer additional options, known as riders, which accelerate payment if a critical illness is diagnosed. Instead of becoming payable on death, the insurance is advanced to the date of diagnosis of any specified critical illness. Vince Christian, a non-smoker and regular scuba-diver and skydiver, prefers to combine insurance coverage for diving with his travel insurance policy. Mr Christian, the manager of the Hong Kong-based chemical import/export companies Roland Schmidt (China) and Christian China Associates, has completed more than 400 freefall skydives. His life insurance policy has no provision to cover his sports. 'I take out separate insurance coverage when I go on diving expeditions,' Mr Christian said. 'In this way I can maximise the coverage [when I go diving] as the case or location dictates without boosting the premium on my existing life insurance policy.' Up in smoke Life insurance premiums for smokers are two to four times as high as for non-smokers. Smoking the odd cigar could classify you as a smoker in the eyes of some insurance companies. Most insurance companies do not distinguish between smokers and other nicotine users. This means that tobacco chewers and users of nicotine patches and gum pay a smoker's premium. Some insurance companies will grant you a non-smoker's premium as early as a year after you have kicked the habit, subject to a blood test for nicotine.