How would a life insurance company find out that I'm a smoker?

You pay higher life insurance rates if you're a smoker, even if you're otherwise the picture of health. If all else is equal, life insurance companies consider smokers a higher risk than non-smokers because of the long-term risks of illness or death from smoking-related diseases, such as lung cancer.

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That's why life insurers ask on applications whether you use tobacco--that includes cigarettes, cigars and chewing tobacco. Resist any temptation to fudge the truth. If the life insurance company finds out you purposely lied, you could be charged with fraud. If it makes the discovery when investigating a claim after your death, it could deny the claim based on misrepresentation, and your beneficiary would not receive any of the policy's proceeds. If the insurer uncovers the lie in the first two years after issuing the policy, known as the contestability period, it could cancel the policy.

Quitting today doesn't mean you qualify as a non-smoker and can get lower life insurance quotes tomorrow. Typically insurance companies consider you a non-smoker only after you've abstained from tobacco for at least a year. An occasional cigarette or cigar might qualify you as a smoker at one insurance company but not another. The precise definition varies.

Tobacco use can turn up on a lab test as part of the medical exam for life insurance. If you're rated as a smoker at one company and think you can skirt the issue by abstaining for a few weeks and applying with another, think again. The exam results from previous applications are maintained in a data base by MIB Group. Insurance companies check the database when they receive new applications to find any discrepancies.

For more, see "Life insurance rates for smokers."