Marijuana is legal in certain states. Is it covered by homeowners insurance?

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Marijuana is legal in certain states. Is it covered by homeowners insurance?

Homeowners insurance covers damage to your home. Fire is a commonly covered peril, so when a Michigan homeowner's house burned down in 2013, her insurer paid out $160,000.

Then the insurance company learned the homeowner's husband started the fire while tending to marijuana plants in the basement. It sued to get its money back. The court found, that by growing marijuana, the couple intentionally increased the risk to the house and ordered them to pay back the money.

A lot has changed since then. In December, Michigan became the 10th state to legalize the recreational use of marijuana. But despite its growing acceptance, marijuana still sits in a grey area for insurers.

Does homeowners insurance cover marijuana?

In general, homeowners insurance will cover damage to your home unless the policyholder caused it intentionally, said Fabio Faschi, property and casualty team lead for Policygenius.

"If you purposely commit arson and set your house on fire while it has a bunch of marijuana in it, it's not going to be covered," Faschi said. "But if you accidentally drop a match and set your house on fire, it's still going to be covered."

But as the Michigan court case shows, what's considered "intentional" can be broad. And while some states have legalized marijuana, the federal government still views it as an illegal drug, leaving plenty of room for inconsistencies when it comes to coverage.

How coverage varies by state

Colorado legalized marijuana in 2014. The state allows residents to grow up to six marijuana plants at home. Insurers treat them just like other plants, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

A standard homeowners insurance policy includes a limit for damage to plants, trees and shrubs, usually up to 5% of the covered value, said Chris Hackett, senior director of personal lines policy for the Property Casualty Insurers Association of America, a trade association. If a house is covered for $100,000, a policy will pay up to $5,000 to cover a loss to plants. Most policies also limit coverage up to $500 a plant, Hackett said. (Learn what homeowners insurance covers and what it doesn't.)

If your marijuana plants were stolen, you could also file a claim with your insurer, Faschi said. But that gets tricky in states where marijuana is illegal, because you need to file a police report.

Any loss of more than a small amount of marijuana will be tougher to cover even in states where it's legal because most states limit how much one person can have at a time, Walker said. In Colorado, for example, adults can only possess an ounce at a time. Even for a homeowner or renter consuming or possessing a legal amount of marijuana, there is enough grey area for insurers to have some discretion over whether and how much they cover related losses, Walker said.

How to make sure you're covered

"The bottom line is to make sure you know what your insurance covers and what it doesn't," Walker said.

Familiarize yourself with your state's laws. If you plan to grow marijuana in your home, it's worth talking to your insurer about whether related damage is covered. (Policygenius can help you compare and buy homeowners insurance policies.)

"It can and will vary from company to company how they would cover damage," she Walker said.

Some companies will be more accommodating, while others may be stricter, Hackett said.

"I would recommend being fully transparent as to what's going on with your insurance agent so you can find the appropriate amount of coverage with the appropriate carrier," he said.

Image: Eldad Carin