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How Can A Ganjapreneur Get Life Insurance?

| May 19, 2016
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Life Insurance, Marijuana Industry, Ganja

So, what the heck is a ‘ganjapreneur’ anyway?   If you have nothing great to do for a few hours and want to laugh out loud in a real way besides what you write on a text note, take a gander here you can see just about any marijuana slang you could ever imagine.  Ganja, is classically defined as another widely-accepted name for cannabis. The term ganja is often attributed to Rastafarian culture, but it is in fact the Hindi word for hemp, introduced to Jamaica by Indian indentured servants. Lately, its usage in western society has become incredibly mainstream and, in some cases, grossly over-commercialized.  Thus, the ever increasing ganjapreneur are those that start business in, on, or around the substance known as marijuana.

As somebody who deals in life insurance, your first instinct is to tell yourself that nobody who smokes marijuana or even consumes an edible form is ever going to have a chance to get life insurance.  In fact, even if they don’t smoke any marijuana, what would be the chances of being able to apply for a buy-sell or key-man life insurance policy with a reputable insurance company if you are an all cash business?  Even in the several states where recreational marijuana is legal or almost half of the country where some form of medical marijuana is permitted, how will you convince the insurance company that your client would be a good risk profile for their coverage?  This is a difficult dilemma for the fast growing ganjapreneur in America.

What’s funny about this topic is that I’ll bet every person who has ever sold life insurance has faced this question at one point or another with a potential prospect.   The prospect is filling out the application and the question comes up about whether or not they smoke.  The prospect asks, “Do they mean cigarettes or some other type of substance?”  After the insurance agent politely chuckles under their breath, they reply with, “They mean any type of smoking.”   Then your prospect responds with, “I’ll sign up for this life insurance but it will take me a few weeks before I can take a medical exam.  I have never smoked in my entire life.”  Any good life insurance agent can put two and two together, but what can you or should you do for the ganjapreneur who needs life insurance?

Well, let’s take a quick look at the current landscape of how insurance companies are dealing with marijuana smokers.  The first question is how will insurance companies determine their policy for marijuana users?   Underwriting at times seems to be one half objective and one half subjective.  It’s the process where the life insurance company assesses a customer’s risk to the insurance company.   At companies that have a policy in place (most do), you can guide your client along more easily using the company’s policy because they will know how their frequency of use will affect their overall rating.  Before this advent of medical marijuana and legalized recreational marijuana, trying to get guidance from a life insurance company was really a crapshoot.

For most general marijuana smokers, you will likely have to classify them as smokers as you would someone who smokes cigarettes.  Depending on the insurance company, they would pay the table rates of what a smoker would which could double their rates.  There are still some carriers that say marijuana is illegal everywhere and thus will not underwrite a marijuana smoker so do your homework in advance.  Since insurance carriers are varying more widely these days, you won’t get preferred rates if you admit to smoking marijuana even recreationally, but you could still get a standard non tobacco rates for only having a ‘celebratory joint’ here and there.   Sometimes, insurance carriers call these people social marijuana smokers.  Go figure that!  Scope out the carriers who have a more or less friendly demeanor toward marijuana use and take note.  I doubt this is going away.

For ganjapreneurs, it is going to be important to keep excellent books and records.  As business owners, despite the fact that their local bank may not bank with them, there is no reason to not legitimately keep the balance sheet, profit and loss, and certainly pay taxes for all of their income.  This business wouldn’t differ than any other cash business; you have to have impeccable books and records.   Like any other cash business, business owners need to think long-term about what they declare on their tax returns because the tax returns will affect things such as getting a mortgage, getting disability insurance, obtaining life insurance and social security.

Business owners need to understand that valuing their business fairly could prove difficult because the environment is changing and developing so quickly.  Trying to put a value on a marijuana industry business involves speculation about where things are headed.  At this time, advisors would be most helpful to their ganjapreneur clients by trying to help make these evaluations and help them secure the right amount of death benefit for their family or for the buy-sell or key-person insurance within the business.   Remember to take into account prospective legislative changes within this fledgling industry when determining the real multiple on the business cash flow.

What may have seemed like a joke in the past will become a big business for insurance agents and advisors who learn how ganjapreneurs can maneuver the financial services industry.  It will certainly vary from those who directly sell marijuana to the person providing non-cannabis products on a wholesale or retail basis.   Either way, if you can figure out this market you might be able to add some green to your bottom line by knowing the rules.


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