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How Can a Ganjapreneur Get Life Insurance?

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So, what the heck is a “ganjapreneur” anyway?  
 
If you have nothing important to do for a few hours and you want to laugh out loud, take a gander at www.ganjapreneur.com/marijuana-slang. 
This is a website where you can see just about any marijuana slang you could ever imagine.  
 
Ganja is another widely accepted name for cannabis. Although the term “ganja” is often attributed to Rastafarian culture, it is in fact the Hindi word for hemp, which was introduced to Jamaica by Indian indentured servants. Lately, its usage in Western society has become incredibly mainstream and in some cases grossly overcommercialized. Thus, the ever-increasing ranks of ganjapreneurs are those who start businesses centering on 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 puts it in their body in any way is ever going to stand a chance of being approved for life insurance. In fact, even if they don’t smoke any marijuana, what would be the chances of being able to obtain some sort of buy/sell or key person life insurance if they have an all-cash business? 
 
Even if you are in one of the several states where marijuana is legal or almost half of the country where some form of medical marijuana is legal as well, how will you convince the insurance company that you would be a good risk profile for life insurance? What a difficult dilemma for the fast-growing ganjapreneur population in America!
 
What’s funny about this topic is that I’ll bet every person who has sold life insurance has faced this question with a prospect at some point. 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?” The insurance agent politely chuckles under their breath and then replies, “They mean any type of smoking.” Then the 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. But I have never smoked in my entire life.” 
 
Have you ever come across this situation in your career? My guess is that you have at one point or another. Any good life insurance agent can put two and two together, but what can or should you do for the ganjapreneur who needs life insurance?
 
Let’s take a quick look at the current ways in which insurance companies are dealing with marijuana smokers. The first question is, how will insurance companies begin to put in place an underwriting policy for marijuana users? Underwriting is still a part objective/part subjective process in which the life insurers ultimately need to assess a customer’s risk to the insurance company.  When dealing with companies that do have a policy, you’ll be able to guide your clients along more easily because they will know how the severity of their marijuana use will affect their overall rating. Before the advent of medical marijuana and legalized marijuana, trying to get guidance from a life insurance company was really a crapshoot.
 
For most prospects who are general marijuana smokers, you will likely have to classify them as smokers, the same as you would classify someone who smokes cigarettes. Depending on the insurance company, your prospect would pay the table rates of what a smoker would pay — 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, your prospect won’t get preferred rates if they admit to smoking marijuana even recreationally, but they could still get a standard nontobacco rate for having only a “celebratory joint” here and there. Sometimes, insurance carriers call these people social marijuana smokers. Go figure!
 
For your ganjapreneurs, it will be important that they keep excellent books and records of their business. Despite the fact that their local bank may not allow them to open an account, there is no reason they should not maintain a balance sheet and profit-and-loss statements as well as file a tax return. 
 
Remember, for those of you who have had to underwrite the owners of all types of businesses, this business wouldn’t differ from any other cash business you have had to underwrite for a buy/sell, key person, or other types of life or disability insurance.
 
The next challenge that you may have with ganjapreneurs is being able to prove their income or the value of their business. Many different types of businesses exist within this growing industry. You will run into your biggest problem in working with those ganjapreneurs who truly have a cash businesses, because they are selling marijuana in states that recognize this as a legal activity. This is where the fact that it is a cash business makes it nearly impossible to keep banking records for the business. As with any other cash business, you should do your best to talk to those business owners about what they declare on their tax returns, because the tax returns will affect things such as getting a mortgage and getting disability insurance. The information on the tax returns also could affect how much life insurance the business owners will buy in the future.  
 
With little real market data on the valuations of marijuana businesses, trying to put a value on one of them is speculative at best.  However, you will have to do your best to help your clients if you are going to deliver the right amount of death benefit for their family or the right amount of buy/sell or key person insurance for the business.
 
Remember to take into account how much more difficult it will likely be in the future to maintain a marijuana business license and what the real multiple should be on the cash flow within the business.
 
What may have seemed like a joke in the past will become a big business for the insurance agents who learn how ganjapreneurs work within their industry. If you can figure out this market, you might be able to add some green to your bottom line by selling more life insurance. 
 
 

Ted Jenkin is the co-CEO and founder of oXYGen Financial, a financial advisory firm in Atlanta. Ted may be contacted at [email protected] .


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