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Marijuana and Life Insurance: Your Burning Questions Answered

Society’s perceptions of marijuana have undergone a drastic change since I was in junior high. Back then, it was normal for schools to assign "Tuned Out" as part of the curriculum and show “Reefer Madness” in class, with the intended purpose of teaching us that pot would turn you into an acid addict who would eventually go crazy or that getting stoned would result in a horrific car crash.

It’s true that pot could be a gateway drug for some people, and driving while impaired is always dangerous, but society as a whole has developed a much greater comfort level with marijuana. Is this change reflected in the life insurance industry? Through the years, I have helped many pot users purchase a policy, and these are the questions that often come up.

In part one, I provided my answers to five of the 10 biggest questions related to pot and life insurance. Here in part two are my answers to the next five biggest questions. 

6. Will an Underwriter Recognize the Difference Between Medicinal and Recreational Use?

The odds are that you’ll be treated as a recreational user. It still boils down to how much you use, how you use it and how frequently you use it.

It is crucial to recognize that the medical condition for which you have been prescribed marijuana will also be underwritten. All other factors being equal, conditions such as chronic pain, muscle spasms and even PTSD may not require too much of an extra premium. But cancer, hepatitis C and multiple sclerosis could result in a higher payment or even a declined application.

7. If I Purchase Insurance Now But Stop Smoking Later, Will My Rate Be Reduced?

It’s a good decision to get the policy now. If you need the coverage, you get it. You don’t want to wait for the optimum time to buy, because tragically a claim may have to be paid in the meantime. You don’t want to shortchange your beneficiaries on the money they will need upon losing you.

Once you are insured, we can work on reducing the cost. When you have stopped using marijuana for a full year, you could very well be eligible for a lower premium. If things don’t work out for you, and you develop an unforeseen medical condition, then at least you will have life insurance in play. You can always try again the following year. (For more from this author, see: 3 Tips for Smokers Buying Life Insurance.)

8. Will I Get in Trouble for Disclosing That I Use Pot If It Is Still Illegal in My State?

That’s a valid concern. Many people are uncomfortable with acknowledging their pot use when it is deemed illegal. However, you are protected by very stringent privacy protection regulations. Here is verbiage that is very typical among carrier contracts:

"(Company) does not disclose any non-public personal financial or any non-public personal medical information about our customers or former customers to anyone, except as permitted or required by law. It is (Company’s) current policy not to disclose customer information to, or share customer information with, other businesses for marketing purposes."

9. Is It Possible to Get a Policy That Has a Marijuana Exclusion?

Yes. There are excess-market carriers that would not factor in your pot usage when they underwrite you. Your policy would have a clause that states they are not liable for a claim that is drug-related. Bear in mind that these policies are typically available only under specific business or financial circumstances and can be more expensive than policies from mainstream carriers. (For more, see: How to Buy Life Insurance With an Alcohol History.)

10. Marijuana Has Great Profit Potential. Will I Be Able to Obtain Life Insurance to Cover the Business?

We are all aware of the importance of life insurance for buy-sell funding, key person coverage, business loan protection and other business needs. But is life insurance available for those on the business side of marijuana? This question is perhaps the biggest indication that marijuana use has become an accepted norm in our society. If you can legitimately go into business selling it, then there can’t be a problem with it, right?

Of course, the key word here is legitimate. On the one hand, life insurance carriers don’t take on the responsibility of determining the legality of any applicant’s business. At the same time, I have not come across a domestic company who would offer a policy to somebody in this business, probably because they are still waiting for legalization. Nonetheless, there are foreign insurers that would provide coverage in this situation. While they often insure business people who provide services around the sale of marijuana, they would consider prospects directly involved in selling.

Just like alcohol and tobacco use, a history of using marijuana can affect your access to life insurance, but as times have changed, so has the life insurance industry. Prequalification would determine exactly how your particular use of marijuana would be treated by an underwriter, but you can still qualify for life insurance.

(For more from this author, see: Using Life Insurance as a Business Succession Plan.)