Editor’s note: This post was originally published on 9/15/16 and has been updated for accuracy and comprehension.
We get a lot of inquiries about life insurance underwriting for people who have used illegal drugs or abused alcohol (OK, we don’t get too many questions about rock and roll!).
And, unfortunately, there are probably more cases involving drugs and alcohol that don’t become known issues until the underwriting process begins, and the information typically derails the case.
Regardless, the use of drugs and alcohol and its effects on life insurance underwriting remain a bit of a moving target, depending on several factors.
Here’s how a few of them impact the underwriting process.
Heroin, Meth, Ecstasy, Etc.
The use of these so-called hard drugs, currently or recently, will be a decline, so forget it – it’s not going to happen.
Cocaine
Not much has changed in life underwriting when there’s a history of cocaine use.
Unfortunately, “coke” seems to be considered more of a recreational drug by many than the drugs listed above, as we constantly hear that the prospect “only tried it once or twice” (and the last time was the night before their insurance exam!).
Not unexpectedly, underwriters tend to believe that one of the symptoms of non-prescription drug use and abuse, including cocaine, is lying – sometimes pathological.
So, who is the carrier supposed to believe?
More often than not it won't be the applicant.
Rating for past use
If a prospect has recently used cocaine and the carrier knows about it, they will not issue coverage.
All carriers include cocaine testing in the urine specimen from the paramed exam.
Assuming a positive test, it will be a decline across the board.
As a rule of thumb, any past use within three years is not insurable.
After three years, a flat extra rating will be applied (i.e $7.50 extra per thousand for X years).
If the last use was over five or six years ago, then it’s possible a Standard rate class could be attained if there are no other risk factors. The age of the proposed insured, the occupation and other lifestyle habits will typically be factored in.
So the answer is maybe.
Prescription Drugs
Most people take them for legitimate reasons.
However, there’s pretty widespread abuse of certain prescribed medications, such as painkillers like Vicodin and OxyContin, sedatives such as Ambien, and psychiatric drugs for anxiety or depression such as Ativan.
Over-use of any of these will negatively impact underwriting. (As an aside, many life insurance carriers are very concerned about the opioid crisis and how it is impacting mortality assumptions.)
And, more importantly, over-use of these prescribed drugs are likely to be identified through doctor notes (the attending physician’s report) and carrier-run “script checks,” a prescription drug database used by life carriers.
This, too, can and often does lead to a negative result for the applicant.
Alcoholism/Alcohol Abuse
Although many people would not put alcohol abuse in the same category as drug abuse, insurance carriers do.
And they seriously consider it when they see it.
Alcohol abuse is not as clear-cut as other drugs and the consequences in the underwriting process can vary.
If the carrier identifies that the alcohol abuse is current, there will be no offer.
If the abuse is currently under treatment or will be in the future, the individual may qualify for coverage (possibly a Standard rate class) in as little as five years after the onset of treatment if the applicant is over age 45.
If the applicant is younger than 45, the guidelines become more stringent and they would probably be looking at a moderate rating, even after five years of sobriety.
Securing coverage
Alcohol abuse is usually detected by the applicant admitting to it or through notes in the doctor’s report.
If it’s noted in the doctor’s report, it’s taken far more seriously.
And more than likely there will be a rating, even after five years.
If abuse is suspected, especially with elevated liver functions on the insurance exam, the carrier may order an Alcohol Marker test from the insurance labs.
Some carriers automatically run an Alcohol Marker from the insurance labs.
Finally, when the applicant is reconsidered for coverage, their motor vehicle report must be “clean,” and if they are attending AA, they may get underwriting credits.
Marijuana
Marijuana use has become a bit more complicated since there’s been a movement to legalize it and to use it on an increasing basis for social and medicinal purposes.
When a carrier sees that a potential client is a marijuana user, their underwriting will be based on the underlying cause for the use, i.e. chronic pain, depression, anxiety, etc.
Marijuana for medicinal purposes
If a person discloses marijuana use (which should be done in all cases!) and has or has had a medical card that can be supported by a full doctor’s report and carrier drug questionnaire, most carriers would consider insuring them not only for the marijuana use but for the reason the marijuana is being used.
Some of the reasons why someone might use marijuana for medicinal purposes could include:
- Cancer.
- Anorexia.
- AIDs.
- Chronic pain.
- Persistent muscle spasms (including multiple sclerosis).
- Seizures.
- Severe nausea (usually associated with cancer and AIDs).
- Glaucoma.
- Arthritis.
- Migraines.
Things like PTSD, Alzheimer's and Hepatitis C might be added to the list.
To rate or not to rate
Many of the underlying causes for marijuana use listed above are not insurable.
For others, a rating may be required.
Those that would be acceptable will probably fall into the Standard to mild sub-Standard rating range.
These might include things such as chronic pain, PTSD (if not on any other anxiety or depression medications) and mild arthritis.
Finally, in very occasional cases, such as glaucoma or migraines, better-than-Standard is possible with some carriers.
Recreational marijuana use
For recreational marijuana use, life insurance carriers are all over the board, not only for the use itself but for the “smoking aspect” of partaking.
Carriers range from offering an applicant a Preferred non smoker rate class for use “two to three times a week” to an outright decline for use more than four or five times a week. It really depends on the carrier’s stance on the use of marijuana and how they treat it in the underwriting process.
As far as being considered a “smoker” for just using marijuana, there are no clear-cut rules across all carriers.
Infrequent use might be classified as a non-smoker with one carrier and a smoker with another.
As you can tell, some carriers are taking a more liberalized approach to offering coverage for people who use marijuana, depending on the circumstances. It’s a topic that continues to evolve (at least with some carriers).
The bottom line
Speak with your General Agent before proceeding on any case where there’s a history of drug or heavy alcohol use (or abuse).
The best approach is to obtain a candid history from the proposed insured before ever taking an application.
That way you don’t end up singing the familiar but ill-fated Clapton tune: “She don’t lie, she don’t lie, she don’t lie...”
Has the recent legalization of marijuana in many areas made more people willing to disclose their use?
