THE BLOG
10/30/2018 12:32 EDT | Updated 10/30/2018 12:33 EDT

Legalized Cannabis May Affect Your Insurance, Even For Non-Users

The insurance industry will be monitoring any effects on their costs very closely in the coming year.

Even if you don't use cannabis, chances are, legalization is going to affect you.

Insurance is one area where cannabis will have a far-reaching impact. Companies have been preparing for legalization for a long time, but even now, there are still a lot of questions about its effects on everything from car insurance to health insurance.

For instance, how will officers who suspect a driver is impaired by cannabis prove it in court? After all, testing for cannabis is difficult. And, will those who grow cannabis in their homes be charged higher premiums?

Let's break down what we know and the remaining questions we have below.

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Will car insurance rates go up?

No car insurance company has come out and said they'll raise rates due to legalization.

What we do know is that in Colorado, where cannabis was legalized in 2014, average car insurance rates surge 54.2 per cent from 2011 to 2017. Now, all of that rise can't be blamed on legalized cannabis. Colorado struggles with local challenges to its insurance industry, such as hail storms, and it faces many of the same challenges other states do, such as distracted driving.

But states that have legalized cannabis have all seen accidents and car insurance premiums go up. In states that legalized, car insurance premiums have gone up an average of 3.2 per cent between 2016 and 2017, compared to only 1.6 per cent for those where it remains banned.

There isn't a lot of clarity around whether a few legal plants will automatically lead to a cancelled policy or higher premiums.

Law enforcement in Colorado has said that legalization has resulted in more impaired driving charges and accidents, which raises costs for insurance companies and forces them to raise rates.

The good news is that insurers in Canada have rushed to work on awareness campaigns around driving and cannabis, stressing the importance of not driving after consuming cannabis.

What about home insurance?

Home insurance companies have long outright cancelled policies if they discovered a home was being used as a grow-op for cannabis.

With legalization, home insurance companies could still theoretically cancel a policy if more plants are being grown than the law, or medical license, allows.

Unfortunately, there isn't a lot of clarity around whether a few legal plants will automatically lead to a cancelled policy or higher premiums.

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Historically, insurers have voided policies for illegal growers because they often modified their electrical wiring to allow for a large number of grow lights, or because growers would increase humidity for their plants, something which often led to mold.

But critics say that many will be growing cannabis plants in much the same way as they would house plants. And insurers don't charge homeowners higher premiums just because they have plants.

The best approach here is to call your home insurance company and be honest about any cannabis plants you're growing. That way, when it comes time to make a claim, you won't suddenly find that your plants voided your policy.

How does this impact health and life insurance?

For insurers, smoking is a high-risk activity that automatically raises life insurance premiums and can impact everything from home insurance to travel insurance.

The good news for cannabis smokers is that many insurers in Canada have removed cannabis use as a "high risk" activity. This means that if you use cannabis, you won't be paying higher life insurance rates the way a tobacco smoker would.

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Some health insurance providers have already begun offering the option for group benefit plans to add medical cannabis, meaning if you have a prescription, you'll be eligible to submit claims for your costs.

Now, it should be noted that there's still a lot of research needed to properly gauge legalization's impact. The insurance industry will be monitoring any effects on their costs very closely in the coming year.

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