Here’s how it works. In the case of a beneficiary killing the insured for the money, the proceeds will be paid to the contingent beneficiary or the deceased’s estate. That’s in most states. The insurance company doesn’t get to keep the proceeds.
Smoking medical pot is a non-issue, unless it constitutes what’s called a “material misrepresentation.” In other words, if smoking pot would disqualify you from being insurable, and you die within the policy’s provisional period, then the company won’t pay the claim. They will, however, return the premiums under certain circumstances. Smoking pot, medical or otherwise, after the policy is issued won’t make any difference in the payout, even if it contributes to the cause of death.
Most life policies have a two-year contestability period. This means that the issuing company can cancel your policy up to two years after they sold it to you, if they discover a material misrepresentation on your application. An example of a material representation is telling them you don’t smoke when in fact you do. An example of a non-material misrepresentation is giving a wrong phone number, even if it’s intentional. There is also a two-year suicide provision. This means that your beneficiary still gets the proceeds if you off yourself after 2 years, which is something a lot of people don’t know.
Once a policy is out of the contestability period, they are bound to pay the death benefit even if material misrepresentation is discovered afterward. For example, you could knowingly have cancer, and not tell them about it when you apply. If you live for more than two years, they will still pay. However, they usually want a medical exam with the application before they’ll issue the policy just to prevent this kind of thing.