Life insurance is probably the most comprehensively underwritten financial product in the marketplace. Everything from current health, to family medical history, to criminal record, is covered - with various lifestyle and health factors in between.
Many people are not comfortable disclosing personal information in these areas. Maybe they had a tough time battling depression. Perhaps they feel ashamed about a criminal conviction back in the day. Some are reluctant to talk about income, or prior financial issues.
Recreational drug use is a common sensitive topic. This is true for a variety of reasons, including concerns about illegality and social stigma. While I understand the hesitation to talk about it, I am here to report that you have everything to gain and nothing to lose by giving thorough and accurate answers to this and every other question on your application.
Here are five reasons why I believe this to be true, based on my 25 years selling the product:
1. If you don't admit to usage, you are committing insurance fraud.
Your application contains verbiage very similar to this:
Any person who knowingly with intent to defraud any insurance company or other person, files an application for insurance or statement of claim containing any materially false information or conceals for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which may be a crime and may subject such person to criminal and civil penalties according to state law.
So if you did smoke pot or do coke back in the day, but deny doing so on the app, that is a materially false answer. So what can happen? The claim can be contested.
Your policy will contain verbiage very similar to this:
This policy shall be incontestable after it has been in force during the lifetime of the life insured for two years from the issue date, except for... fraud in the procurement of this policy, when permitted by applicable law in the state where this policy was delivered or issued for delivery...
I have always understood this to mean that if the company finds you lied about drug use, for example, then they could contest the claim even if the cause of death was not related to drugs. Why risk depriving your beneficiary of their money?
2. It probably won't affect the rate anyway.
Your recreational activity 10, 15, or 20 years ago or more, does not necessarily affect your mortality now. Today, you are older and wiser, and engaging in activities that are better for your health. Underwriters understand that. Unless they have reason to believe you are at risk for going back to your old ways, odds are they will not hold your past against you pricewise.
Even if your drug use was more recent, it could affect your eligibility for a policy only temporarily. In the worst case, maybe an offer would be postponed. Perhaps additional premium would be assessed on a short-term basis. In both of these cases, your eligibility for coverage could be reassessed year after year until a carrier is found who would make a decent offer. Good deals that are not available now could be available later.
In some cases, current drug use would not preclude an offer now. For example, people who use marijuana can qualify for low rates, including non-smoker pricing in certain situations.
3. Going through full disclosure builds the confidence of underwriters.
Life insurance as a business. Like every good business deal, it has to be a win-win for all parties concerned. The consumer needs a policy that gets the job done. The company needs a paying customer. The broker needs to earn a commission once the sale is finalized.
Nobody wins when applications are declined for incomplete or contradictory data. If information emerges in underwriting that conflicts with other disclosures, then the deal can be off, and all parties involved will have wasted precious time and money.
Full disclosure in the prequalification stage of the purchase is essential for avoiding this problem. Once an underwriter sees that you have provided thorough and accurate answers on the "minor" stuff, like drug use long stopped, they are confident underwriting won't uncover major inconsistencies that could kill the deal. They are much more likely to put their best rate on the table from day one and stick to it. You have established credibility with them.
4. It is a private matter.
Privacy protection regulations keep your application information within the strict confines of the insurance company and its affiliates. These laws are taken very seriously. You can see this with all the authorizations you have to sign for even those parties involved to have access to your application and underwriting file.
This means that nobody else gets to see your answers to the personal questions. Not your spouse, not your children. Not your business partner or employees. Not the bank who needs the life insurance to cover your business loan, or the investor who needs you covered as a key person.
It also means that the life insurance company is not going to report you to law enforcement agencies for having done something illegal back in the day. Go ahead and ask a criminal attorney if he’s worried about that happening. I don’t think so.
5. There is no stigma.
I understand that in the greater social environment, recreational drug use is considered “bad.” I recall being in “health” class in junior high school in the 60s. I think the instructor took great relish in forecasting doom if you smoked pot. First it would be marijuana, then you would move on to heroin, and finally you would end up in jail - or dead. Today, guys like that are still waging the “war on drugs” and trying to pack the prisons full of drug users.
Putting the politics aside, the fact of the matter is that many extremely successful and wealthy people have used recreational drugs. For some, it was a phase; with others, it became an addiction that needed treatment. Some still use them.
Since drug use can in some way impair health and functioning, it is valid for a life insurance company to determine how it may be impacting your mortality. With the proper direction from your broker, this assessment could and should be done fairly, and with the upmost respect and sensitivity. Find a broker you can trust, and you will be in good hands.