The Cannabis Conundrum: How to Approach Your Life Insurance

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Do you use marijuana medicinally? Recreationally? If so, it’s important to know what the laws are in your state. As the push to reform state and federal marijuana laws continues to sweep the country, marijuana use can complicate the life insurance process. 

Underwriting for marijuana smokers differs from company to company. We’ll sort out what to expect when you’re applying for life insurance for marijuana smokers and discuss some key legal reforms to marijuana laws in the U.S.

The State of Legalized Cannabis

Under federal law, marijuana is still categorized as an illegal substance under the Controlled Substance Act. Over the past decade, however, a swell of public support and private lobbying efforts has led to more and more states making massive marijuana law reforms.

Today, almost half of all states as well as the District of Columbia have legalized recreational and medical marijuana use.

A variety of proposed decriminalization reforms is pending, or at least being considered, in several states, including Pennsylvania, Rhode Island, Wisconsin, Hawaii, Minnesota, Nebraska, and North Dakota. There have also been a few court challenges to ballot measures to legalize recreational marijuana in Florida, New Jersey, and South Dakota.

How does the legalization of cannabis impact insurance?

The state of legalized cannabis has impacts on insurance companies and policyholders.

First, if you live in a state where it’s legal to use marijuana for medical reasons or recreational purposes, insurance companies cannot deny, cancel, limit, refuse to issue or renew insurance, or in any other way discriminate on that basis.

For insurance companies, marijuana use is likely to affect their risk assessment of policyholders. Cannabis affects driving and other motor skills, which affects car insurance. It also can have health impacts for weed smokers, which affects health and life insurance.

So, people looking to apply or renew their insurance policies need to understand the impact marijuana use can have on car, health, and life insurance.

How does marijuana use affect life insurance?

Life insurance companies operate on risk. They use certain risk factors and categories to classify people looking for insurance. The three primary risk factors for life insurance are health, lifestyle, and age. Depending on those factors, applicants are rated and put into classes like standard, preferred, or super preferred.

The riskier the insured, the more expensive it is to get coverage. Sometimes the risk is so high from the insurer’s perspective, they won’t provide coverage at all.

Marijuana use can make someone high risk under the health factor. If smoked, marijuana may cause lung conditions or cause other health issues that might be considered a high health risk to insurers.

Whether it’s for medical or recreational purposes, people seeking coverage or who have existing coverage want to know how marijuana use will affect their life insurance premiums.

Does medical marijuana affect life insurance rates?

The answer to that is tricky. The use of medical marijuana is probably not as significant a factor as the underlying condition that requires marijuana treatment.

Having a prescription for medical marijuana is typically evidence of an existing health condition. Most life insurance companies require medical disclosures. They have access to medical records that will state the reason why medical marijuana was prescribed. 

Ultimately, it depends on the underlying medical condition. If medical marijuana is being prescribed for a cancer-related illness, your rates may be higher. If, on the other hand, it’s prescribed to calm low-level anxiety, then it likely won’t affect your life insurance rates.

Does recreational marijuana affect life insurance rates?

Recreational marijuana use should not affect life insurance rates unless the user is a smoker or lives a high-risk lifestyle.

Some insurance providers will put marijuana smokers in the same category as tobacco smokers. Life insurance policies for tobacco users tend to be more expensive, and in some cases they pay twice as much for their policies than nonsmokers. 

There’s also a chance conservative insurers could classify recreational users as high risk due to lifestyle. They’ll want to know if the marijuana use is accompanied by alcohol or other drug abuse, which may raise premiums.

That said, casual, infrequent marijuana smokers who are in good health shouldn’t worry about increased rates. So long as there aren’t any other serious risk factors, recreational marijuana users, even smokers, can qualify for the best insurance rates.

What is life insurance?

Some people describe life insurance as financial peace of mind after you die. Essentially, life insurance is a legal contract between the policyholder and the insurance company. The insurance company agrees to pay a lump sum of money upon the death of an insured person in exchange for payment of the policy premium.

There are two basic types of life insurance: term life and permanent life. Whole life is a type of permanent life insurance.

Term Life Insurance

Term life insurance lasts for a set time period, typically a 5, 10, 20, or 30-year term. The life insurance expires after the term unless the policy is renewed.

If the insured dies within the term, the insurance company pays out a guaranteed death benefit to the named beneficiary or beneficiaries. Because term life is temporary, it’s often used to cover debts, like mortgage payments and medical expenses, or provide financial support for a spouse or dependent if you die during the policy term.

Permanent Life Insurance

Permanent whole life insurance differs from term life in two main ways.

First, while term life insurance is for a specified number of years, permanent life insurance lasts for the insured’s entire life.

Second, in addition to a guaranteed death benefit, permanent life insurance has a cash value account. A cash value account is like a savings account built into a life insurance policy and can be accessed during the insured’s life.

How should marijuana users approach life insurance?

Lots of life insurance companies sell traditional life insurance policies to marijuana users. Even so, life insurance underwriting is all about measuring risk. That means for traditional policies, underwriters will ask for medical information and may require an exam or even a drug test.

At a minimum, to determine how risky you are to insure, providers will want to know where you live to see if it’s a state where marijuana is legalized, whether you’re using marijuana recreationally or medically, and how often you use it.

The answers to these questions will likely affect your rates and not your ability to get a policy. But the life insurance options for marijuana users are not limited to traditional term and permanent life policies.

There are several other approaches marijuana users can take to getting life insurance. They include guaranteed acceptance whole life insurance, no medical exam term life insurance, and even funeral expense life insurance.

The information below will help you consider which option is best for you.

What is guaranteed acceptance life insurance?

Guaranteed acceptance life insurance, also called guaranteed issue or GI life insurance, is a variation of whole life insurance policy with a limited death benefit. GI insurance is a good fit for high-risk individuals like people with serious medical conditions who can’t qualify for a traditional whole life insurance policy.

GI life insurance rates are based solely on your age, location, and gender. The application process does not involve health questions, and these policies typically have no age limits or waiting periods. 

Like traditional whole life insurance policies, GI policies can have cash accounts that build a cash value over time. Also, as with other whole life policies, coverage lasts as long as you continue to pay the premiums.

The biggest downside to GI life insurance is that typically, the maximum amount of death benefit you can buy is $25,000. Rates also are more expensive because these policies are for people in a high-risk classification.

What is no medical exam term life insurance?

One approach marijuana users can take to life insurance is the no medical exam route.

If you have good health but are considered high risk because of your marijuana use, you may be a good candidate for no medical exam term life insurance. No medical exam life insurance is a kind of term insurance that does not require an in-home exam as a traditional term policy would.

No medical exam term policy death benefits range from $25,000 to $1 million.

What is funeral expense life insurance?

Funeral expense life insurance covers funeral and burial costs. There are two types of funeral expense life insurance: burial insurance and preneed funeral insurance.

Burial insurance is just what it sounds like. It’s a life insurance policy with a death benefit sufficient to cover the cost of funeral or cremation expenses when the insured dies. The death benefits are typically between $5,000 and $25,000.

Preneed funeral insurance earmarks the death benefit specifically for funeral or cremation costs, which is paid directly to the funeral service provider. It covers predetermined expenses like the funeral home, cremation services, and costs associated with church and burial services. It can lock in costs for services and merchandise for the price at the time the policy was issued.

Should I lie about marijuana use when getting life insurance?

While it might be tempting to omit information or lie about marijuana use, you should never lie when dealing with insurance companies.

First, insurance companies are relying on customers to make accurate disclosures and give truthful responses to determine the right policy and quote for them. So, being truthful is the best way to get accurate quotes and expedite the application process.

Another reason to be truthful is that you’ll likely get caught if you lie. Insurance companies get authorization from you to obtain your medical records. They will verify what you tell them, and if they find discrepancies, the carrier may charge a higher rate or cancel the policy altogether.

Finally, withholding information or providing false information when getting life insurance is fraud, plain and simple. There are very serious consequences for committing fraud when obtaining insurance, including policy cancellation, premium increase, claim denial, and even civil damages and criminal penalties.

What if I get denied life insurance because of marijuana use?

Generally speaking, private insurance companies have the right to approve or deny coverage. That decision is the insurer’s sole discretion.

Consumers, however, have certain rights when it comes to insurance. Insurance companies cannot discriminate against consumers, and cannot commit acts of bad faith. Bad faith claims can relate to one or more actions or inactions by the insurance company, including the improper denial of coverage.

If you use marijuana medicinally or recreationally in a state where it is legal to do so and were denied coverage, you should consider formally challenging the denial decision or contact an insurance lawyer to discuss your rights.

Lauren Blair is a lawyer and writer for the car insurance site, QuickQuote.com. She has over 25 years of experience in litigation.

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