Insurance is a risk adverse business, and doing drugs can make it hard for people to find insurance coverage. On most insurance applications, applicants are asked if they have consumed illicit substances within the past 12 months, and whether the person is applying for critical illness insurance or life insurance, ticking off the box for drug use will raise a red flag with the insurance company. Depending on the follow up questions, applicants may find themselves being rated or declined.
In Canada, drug use has cost the healthcare system up to $8 billion, and approximately 11% of Canadians regularly use illicit substances (with the most popular substances being marijuana, cocaine, crack cocaine, methamphetamine, heroin, and ecstasy). These are numbers that insurance companies are aware of and factor in when deciding to provide coverage. When someone is declined or rated, it’s not about penalizing someone for breaking the law or taking a moral high ground; people who regularly use recreational drugs are at a higher risk for developing medical conditions or suffering an earlier death than people who do not take drugs. It could come from contaminated needles, driving under the influence, or accidental overdose.
While regular drug users can and do get insurance coverage, those who do harsh drugs like cocaine and crack cocaine may find themselves at a much higher risk of being declined for coverage. One option for people who are concerned about being declined for current drug use is to apply for a no medical insurance policy. Both simplified issue and guaranteed issue plans are options available for drug users. Simplified issue plans often do not have a drug use question on them and guaranteed issue plans ask no medical questions at all. For those who have been sober for between 4-6 years, they may find (depending on the insurance company) that they qualify for a standard plan or, in worst-case scenarios, have a rating applied to their policy. For marijuana, daily users may face a decline while occasional users may only face a rating.
One thing that is important to remember is to be honest when applying for insurance. If a person lies on their application and it is discovered, not only may their insurance policy be cancelled but they could face stiffer penalties as well. Even a simple mistake can cause a policy claim to be denied, so it is crucial to be up front with everything. If you are concerned about how your drug use may cause you to be declined, it is better to discuss it with your insurance broker before the application is filled out. If the broker is aware of the issue ahead of time, he or she can direct you to an insurance company or plan that you are more likely to be approved for before you submit your application. Having a decline on the record can make it so that even plans you may have qualified for will no longer be available.
Using drugs can limit a person’s ability to get affordable life insurance, but by talking with an insurance broker and choosing an appropriate plan it is possible to get covered.
NoMedicalLifeInsurance.ca is an initiative of independent insurance expert Tamara Humphries and LSM Insurance.