Non-smoking pot user? Look for breaks on life insurance premiums

By Susan Goldberg | October 17, 2016 | Last updated on October 17, 2016
4 min read

You may use marijuana for medical purposes or even recreationally.

If that’s the case, it’s important to be aware of your life insurance rates. Insurers have traditionally rated pot users as smokers, charging smokers’ rates that are often 40% to 50% higher. But that may soon change.

Recently, a host of carriers—among them Empire Life, Great West Life and Sun Life—have decided not to penalize clients who occasionally use pot or hashish. Other providers have followed suit or are in the process of updating their positions.

The change, says Joan Weir, director of health and dental policy at Canadian Life and Health Insurance Association in Toronto, was largely due to a well-organized, public campaign by medical marijuana advocates. The campaign, she says, brought forth a convincing amount of scientific evidence about pot’s benefits and relative safety compared to tobacco.

North American trend

There are also market forces. In 2015, a Munich Re survey found that nearly one third of major U.S. carriers viewed marijuana users as non-smokers. It’s unsurprising that trend has gravitated northward, given the federal government’s recent legalization of medical marijuana and a subsequent move to decriminalize cannabis in 2017.

Individual carriers, says Weir, will have reviewed the science, as well as their books of business to determine whether pot use has a similar health impact as tobacco use. Clearly, they’re concluding that it does not.

This opens the door for recreational pot users to have their life insurance policies reviewed. If you who use marijuana either medically or recreationally, and were previously assigned smokers’ rates, you now have the opportunity to be considered for non-smoker rates.

The changes don’t give marijuana users free reign. BMO, for example, is extending non-smoker rates to “occasional” weed users, which the company has defined as no more than two joints a week. (Those who use marijuana for medical purposes will also be considered for non-smoker rates.)

If you want to benefit from the lower rates, be sure to exclude tobacco from your joints: all carriers stipulate that users of marijuana will be considered non-smokers only if they eschew e-cigarettes, tobacco and nicotine.

Disclose use

The discovery process for life insurance, says Sarah Brown, a broker at Al G. Brown & Associates in Toronto, shouldn’t be radically different.

“Whenever we fill out an application for insurance, we’ve always had to ask clients whether they have used marijuana and other recreational or illegal substances. We still have to ask, and they will still have to disclose,” she says.

Most carriers, including Wawanesa Insurance and Empire Life, are in the process of updating forms to reflect the change. They will still require new applicants who use marijuana to disclose it and provide details as to how much they use, how often and in what forms.

Whether you smoke a (tobacco-free) joint, vape or ingest pot doesn’t make a difference, says Weir.

Application process

The application process is more than just checking the “non-smoker” box, says Brown, who may review some clients’ files to see who could be eligible for the new classification.

Applicants will have to fill out all standard health and lifestyle questions when they apply for the change. And an insurance carrier’s decision will take into account all information on the form.

If you have no health changes, you shouldn’t have much to worry about. But if, for example, you’ve gained a significant amount of weight, have been diagnosed with a new medical condition or drink more heavily than you did in the past, you may not receive a break on premiums. Insurance companies, however, cannot increase the premiums they charge for an existing policy based on this new information.

What if you hesitate to disclose drug use? Not doing so is a bad idea, says Ken MacCoy of RitePartner Financial Services in Chilliwack, B.C. “If you don’t disclose that you’re using, and then THC or another substance shows up in your blood or urine samples, the policy will be voided for nondisclosure or fraud.”

Risks to your policy

Insurers can also contest or rescind a policy, or deny a claim altogether, if an applicant fails to disclose or misrepresent information in her original insurance application, or a reinstatement or change to the application.

Brown also points to the industry’s two-year contestability period, which allows insurers to rescind a policy within the first two years without having to prove fraud. In this case, says Brown, a carrier only needs to have evidence of “material misrepresentation”—that is, false or undisclosed information.

The onus is on you is to fully disclose all drug use. MacCoy emphasizes the risks of nondisclosure and fraud: “When they’re signing, I tell them, ‘Your signature on the application verifies that all information and facts provided on the application are truthful, to the best of your knowledge.’ And when I deliver the policy, I always have them sign my own policy-delivery form and remind them of the risks of nondisclosure.”

If you’re leery of admitting you use pot—or stronger drugs—MacCoy points out that insurance applications are confidential and cannot be shared with law enforcement.

That said, he notes an applicant who discloses cocaine or heroin use is extremely unlikely to be approved for life insurance. If they are, they’ll face much higher premiums.

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Susan Goldberg

Susan is an award-winning freelance writer and editor based in Thunder Bay, Ont. She has been writing about personal finance for more than 20 years.