diff --git a/sqlalchemy_utils/types/password.py b/sqlalchemy_utils/types/password.py
index 2b050c9..5d95e80 100644
--- a/sqlalchemy_utils/types/password.py
+++ b/sqlalchemy_utils/types/password.py
@@ -143,6 +143,9 @@ class PasswordType(types.TypeDecorator, ScalarCoercible):
             return Password(value, self.context)
 
     def _coerce(self, value):
+        if value is None:
+            return
+
         if not isinstance(value, Password):
             # Hash the password using the default scheme.
             value = self.context.encrypt(value).encode('utf8')
diff --git a/tests/types/test_password.py b/tests/types/test_password.py
index 7115ce6..8b2a116 100644
--- a/tests/types/test_password.py
+++ b/tests/types/test_password.py
@@ -100,3 +100,17 @@ class TestPasswordType(TestCase):
 
         # Not sure what to assert here; the test raised an error before.
         assert obj.password != other.password
+
+    def test_set_none(self):
+
+        obj = self.User()
+        obj.password = None
+
+        assert obj.password is None
+
+        self.session.add(obj)
+        self.session.commit()
+
+        obj = self.session.query(self.User).get(obj.id)
+
+        assert obj.password is None