Why is Marijuana a Risk for Life Insurance Companies?

Now that more and more states have legalized the medical use of marijuana, consumers are asking why is it a risk for life insurance companies. Now, over 50 percent of the states have found it useful to legalize marijuana for medical purposes. Additionally, seven states and the District of Columbia have legalized marijuana for recreational use.

Expanded research has unveiled the medical benefits that were previously unknown and now life insurance underwriters are faced with how to properly rate for the usage of this substance.

Currently, medical marijuana is used as a treatment for an array of diseases and illnesses that include chronic pain, insomnia, unintentional weight loss, nausea, glaucoma, asthma, and premenstrual syndrome.

With so many states opting to legalize marijuana for medical use, you would think life insurers would realize the medicinal benefits, right? It depends. Although using marijuana would have caused a denial in the past, or at best a table rating, insurers today are taking a more liberal stance on its use. In fact, some carriers will even offer a preferred rate if the use only involves edibles rather than smoking.

Why is Medical Marijuana a Risk?

A life insurance underwriter is not especially concerned that medical marijuana has been prescribed for an applicant, they are concerned why it was prescribed. Although the medical use of marijuana is accepted in over half of the U.S., it is still a prescribed drug and so underwriters want to know about the underlying illness that is requiring its usage.

In many cases, medical marijuana acts like a double-edged sword. If the underlying condition isn’t considered serious to require the drug, the insurer is likely to consider marijuana a risk and consider the usage as recreational and rate it accordingly. Recreational use of marijuana is not a deal breaker for some companies, but if a rate is offered, it’s likely to be a smoker rate or even higher.

The bottom line is life insurers are conservative when it comes to the risks they will accept and offering preferred rates is very rare for any applicant with the underlying issues that require a prescription for marijuana. The good news is that times are changing and several insurance companies have stepped up and are taking a more liberal view marijuana use.

Do Insurance Companies Report Marijuana Use?

Life insurance companies will not report you, even if your marijuana use is recreational. All of the personal and medical information you provide to a broker, agent, or insurance company, is fully protected under federal law (HIPPA). Even if your application is rated or declined, the insurer can only report the medical issue to the Medical Information Bureau (MIB), not the treatment for it.

Your use of marijuana, whether medical or recreational, cannot under HIPPA law be disclosed to any outside party, including law enforcement, your employer, or members of your immediate family.

Should I Lie to Get Better Rates?

Absolutely not. If you omit your marijuana use on the insurance application, it can still be detected when you are required to have a blood and urine test by the underwriter. Almost every life insurer that offers standard life insurance is going to require a medical exam which will is likely to include a blood and urine specimen.

It’s also important to note that cannabis is retained in your body for a minimum of three days and in some cases up to two weeks. The cannabis may also be detected in the urine for as long as a month, depending on your usage.

If you were able to fool the insurance company about your marijuana use during the underwriting process, the company still has a two-year contestability period. This means that if you were to die within that period, the insurer can conduct a detailed investigation around every health question on your application, and if marijuana use is discovered during the application process, the death claim will likely be denied.

Which Companies Are “Marijuana Friendly”?

Remember, the insurer is more concerned about the illness that motivated your doctor to prescribe medical marijuana. If your marijuana use is recreational, the insurer will typically rate you according to the amount and frequency of your usage. Most carriers will automatically assign a smoker rating right from the start, which typically more than doubles the amount you would normally pay. The following companies currently take a more liberal stance on marijuana use and should be looked at before any others:

Metlife

Metlife currently stands out amongst life insurers because they will allow applicants to use marijuana up to four times a week and receive a standard non-smoker rate, and once a week use can earn preferred rates. Currently, we are not aware of any other carrier with such liberal underwriting guidelines. Metlife will distinguish between smoking and edible use, and the company is willing to offer preferred elite rates for applicants who use only edibles.

Prudential

Prudential is considered very competitive because it will allow a standard rate for marijuana use up to three times a week. Prudential also receives high marks since they are a preferred company for high-risk cases which can be very important for medicinal users that are prescribed for a serious medical condition.

Principal

Principal made this list because they will allow up to two uses per month and still qualify as a standard non-smoker. This may not appear to be a liberal position but remember, most carriers will assign a smoker rate for any use. They will consider better rates on a case by case basis if the applicant strictly uses edibles.

United of Omaha

According to United of Omaha, marijuana users that will limit their usage to once per week can still get standard non-smoker rates. Although they do not offer preferred rates when you list marijuana use on the insurance application, they are still considered to have fairly liberal underwriting guidelines.

American General

If you are an occasional marijuana user, American General may offer preferred rates. If your usage is three times or less per year, you may still be offered some of the best rates in the marketplace. For applicants who use it a bit more such as twice per month. American General will still offer standard rates, which is considered pretty liberal underwriting.

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