Get Approved for Key Person Life Insurance in Cannabis Businesses

Written by MJ Life Insurance

There are many vital reasons for a marijuana business owner to have key person life insurance.

For just about every business, especially small and medium sized businesses in the marijuana industry, you have particularly important personnel vital to the survival of your operation.

Many marijuana business owners have active or silent partners. Others depend on key staff members for the business to function. Due to most cannabis related businesses being fairly small, it’s difficult to lose and replace people in key positions. If they were to die unexpectedly, the business would suffer. Key person life insurance can also be crucial for third party contracts.

How important is key person life insurance to a business owner in the marijuana industry?

Here’s a case study where key person life insurance helped out someone’s business:

A Case Study Example

A business which we will call ABC Marijuana Farm (confidentiality reasons) was looking to expand from cultivation into the seed market. Another company had a grower who specialized in breeding hybrids. The process would give the acquiring company a superior competitive advantage and dramatically increase profits through expansion of their breed into the more popular varieties. As the acquisition was dependent on a quick completion, ABC Marijuana Farm required the grower be insured with a key person life insurance policy to protect their investment. The company being acquired bought a $3 million dollar key person policy and the deal was completed to everyone’s satisfaction.

If your business depends on a cultivator/grower, engineer, or a particular sales person, how their loss will affect your business?

Many businesses also have partners who are directly active in the business or provide crucial financial support. Additionally, these investors who will be providing capital to your enterprise will likely require that you have key man insurance.

The loss of any of these key persons with unique skill sets could cause your business to fail.

The smart solution to protect your business is to buy marijuana business owner key person life insurance.

The Problem With Key Person Life Insurance in the Marijuana Industry

key man life insurance

Most life insurance companies still reject people working in the industry. Even if they don’t smoke.

Most life insurance companies will decline marijuana business owners when it comes to buying key person life insurance. To the insurance companies, marijuana has a stigma attached to it because it is still illegal at the federal level. As such, most traditional carriers will automatically decline your application.

The good news is there are a handful companies that will offer life insurance (as well as key man life insurance) to people working in the marijuana industry.

There is 1 insurer (Petersen International Underwriters) who can provide key person life insurance in situations that are especially difficult or if the person who needs a policy has serious health issues. This company can provide approval in as little as 48 hours.

If you need marijuana business owner key person life insurance fast, then call MJ Life Insurance at (888) 987-8447 because we can help.

How Does Marijuana Business Owner Key Person Life Insurance Work?

Key person life insurance premiums are payable by the company. In most cases, the company collects the benefits which are generally tax deferrable (you should always seek the advice of a financial consultant to ensure this applies to your enterprise).

You can choose between 2 forms of key person life insurance including:

• Term Life Insurance
• Permanent Life Insurance

Term life insurance pays death benefits only and is clearly the most affordable for those companies seeking coverage. All you have to do is select the length of the term such as 5, 10, 15, 20, 25 or 30 years and the amount of coverage.

key person life insurance replacement

Some people are key to the survival of the business. These key people are almost always difficult to replace.

Permanent life insurance, which includes Whole Life and various types of Universal Life, provides not only death benefits but also a cash value accumulation feature. For this reason, permanent life insurance is much more expensive.

The main difference is that as the cash value accumulation portion grows, the company can access the proceeds. These proceeds are generally tax deferred.

Important Key Person Life Insurance Tax Information

Warning! Congress passed a law in 2006 that requires taxes to be paid on life insurance policies owned by a company when the insured person is unaware/unconsenting. The idea was to prevent companies from taking out policies on their employees to profit off their deaths. Since this covers key person life insurance, make sure you have paperwork notifying the employee as well as a signed consent notice. Here is a Forbes article with more detail. 

Be aware that for either form of key person life insurance, the premiums payable are not tax deductible. Creditors can also make a claim against the cash value accumulation portion of a key person permanent life insurance policy.

The essential purpose of key person life insurance is to provide replacement funds. Which will allow your business to survive until you can make alternate arrangements to find a suitable replacement.

These additional funds from the life insurance proceeds will keep the company financially viable in the interim.

You can also set up key man insurance as an incentive for new hires. The proceeds can also be payable to the both the company and to the person’s beneficiaries/survivors.

Does Your Marijuana Business Have a Succession Plan?

If you were the sole owner of marijuana business, what will happen to the business should you die? It is vital that you arrange who will take over the business should you pass away unexpectedly so your beneficiaries aren’t left in a bad position.

If you do not have a succession plan, then it could result in a severe disruption to the business as the heirs battle for control. If the successor is someone else then they may need key person life insurance proceeds to continue the smooth flow of the business.

Sample Key Person Life Insurance Plan for Marijuana Business Owners

If you are looking for immediate access to key person life insurance, then take a look at this plan which you can find approval for in as little as 48 hours.

Policy Perks

Key person life insurance has fewer hoops to jump through than regular life insurance.

The provisions of this policy which we have available can provide the following coverage benefits:

  • Term Life Insurance up to 12 months
  • Renewals will be considered if ongoing coverage is necessary
  • No medical exam or medical records are required

What circumstances might require a short term key person?

This key person term policy would work super well for people in the following situations:

  • Coverage is required immediately
  • Medical exams are an issue
  • Unusual income issues
  • Insured person resides outside of the U.S.
  • Coverage is only required for a brief period
  • Health issues exist
  • Divorce decrees
  • International travel
  • Issue limits are a problem

The financial information you have to provide on the application includes:

  • Loss of revenue due to the death of the key person
  • Costs incurred to find a replacement
  • Cost of temporary replacement staff
  • Valuation of ownership
  • Loss of future accounts
  • Total loss resulting from death

What does the application ask?

The application requires you to answer a brief health questionnaire. The 8 health questions are the following:

  • Do you have any physical defect or infirmity?
  • Have you suffered from high blood pressure, heart condition, rheumatic fever or diabetes?
  • Have you ever been diagnosed with cancer?
  • Have you been physically or mentally unable to work over the past 12 months?
  • Have you been declined or accepted for life, accident or illness insurance?
  • Do you engage in hazardous sports or other dangerous activity?
  • Are you planning foreign travel in the next 12 months?
  • Do you have a valid pilot license?

This is just one example of the policies which we feature for key person life insurance for marijuana business owners. While Petersen International Underwriters is one of our favorite companies (because they offer coverage to virtually everyone), other life insurance companies are starting to open up to the marijuana industry. Although major changes in the industry like this are a slow process.

How MJ Life Insurance Helps Marijuana Business Owner with Key Person Life Insurance

MJ Life Insurance specializes with helping marijuana business owners in finding any form of life insurance they need. All forms of life insurance products are a particular challenge for those who own and operate marijuana businesses.

Traditional insurance companies decline marijuana industry business owners simply because of the industry. We specialize in helping people working in the marijuana industry find coverage at affordable rates.

This includes finding coverage for the following requirements for both your business and to protect your family:

  • Marijuana Business Owner Key Person Life Insurance
  • Marijuana Business Owner Disability Insurance
  • Marijuana Business Owner Buy Sell Life Insurance
  • Marijuana Business Owner Life Insurance for Loan
  • Low Cost Personal Term Life Insurance Policies
  • Affordable Personal Permanent Life Insurance Solutions

MJ Life insurance is an independent life insurance agency. We have access to over 70 life insurers so we work for you and not the insurance company.

This rapid approval policy above is just 1 of the several offered by Petersen’s and other carriers which we feature here at MJ Life Insurance. If you need help finding marijuana business owner key person life insurance, then call us right now at (888) 987-8447 because we can help!

About MJ Life Insurance
About MJ Life Insurance

Our Mission:  To help marijuana users get approved for life insurance at the lowest rates. MJ Life Insurance is comprised of life insurance experts that understand the application process, underwriting details and company selection to best help our clients. Contact us with any questions and we will be your advocate to secure the best rates on your life insurance.

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