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With more States moving to legalize cannabis, the need to insure cannabis is becoming a booming industry. With a legal framework that is sketchy to say the very least, mainstream insurance companies are not too enthusiastic to get their feet into these murky waters. As a result getting the right insurance broker to partner with your cannabis business can be as tricky as finding a reliable street dealer. To get you started we have prepared this guide that details everything you need to know about Cannabis Insurance for business in 2020. Remember we can get you insurance coverage from seed to sale.

Farmerbrown Cannabis Broker

Let’s dive in

In California, a cannabis farmer was awarded an insurance payout in excess of $1 million when thousands of his plants were destroyed by ashes from a wildfire.
You can bet that this farmer was relieved that he had taken an insurance coverage, and his claim was covered and paid out. This was one of the first claims for crop destruction in the nascent cannabis insurance market.
As a cannabis entrepreneur, being compliant so that you can maintain your operating license, handle claims from customers and mitigate financial risk in case of theft are just but a few of the issues your business might face.
At Insurance420.com we strive to understand your unique business needs and tailor insurance solutions that are unique to you. We strive to accurately represent the risk profile of your business so you can get the coverage you need at the most affordable price.
Our team of insurance experts will be eager to craft a detailed risk management plan for your cannabis business. We are only a call away, do not hesitate to reach out to one of our expert brokers.

What Types of Insurance Do you need for Your Cannabis Businesses?

Doing business in the Cannabis industry, you might ask yourself what sort of insurance does your business need?

As an emerging business, the right coverage for your cannabis business poses very unique risks and challenges.

Some of the obstacles you might face include conflicting Federal and State laws regarding the treatment of hemp and cannabis. Marijuana is still classified as a Schedule I controlled substance by the U.S. Drug Enforcement Agency, and as such it remains a federal crime to grow, sell, and/or use marijuana. Since Marijuana is still illegal at the Federal Level almost all of the big name Insurance companies will not touch any business that has any connection with the cannabis industry. This goes as far as canceling Landlords property coverage if they rent space used in any marijuana related industry. and even the lack of willingness of major carriers to be involved with the industry. All these factors can make it difficult to find the right insurance policy that suits your business needs. Consequently, cannabis businesses have been forced to settle for substandard policies that leave their businesses paying to much for substandard coverage.

With so much money invested in your cannabis business along with the  sleepless nights and hard work, it is best that you operate with the best insurance coverage available. This will give you the peace of mind knowing that your business is properly protected. The only way to do this is to transfer the risk to an insurance company by obtaining the necessary policies.

We therefore advise that you talk to one of our expert insurance brokers who will make sure all of your needs are covered.

We are a partner who has vast experience in the cannabis industry. We will secure you an insurance policy that is tailored to cover all the important components of your business.

How Much does Cannabis Insurance Cost?

Each policy is unique. There are many factors in determining the cost of the coverage, the limits required and the magnitude of the business. It is up to the insurance underwriter to compound all these variables and come up with a premium. Working with a knowledgeable agent ensures that they will not only negotiate the right coverage for you but also obtain the best pricing options for your business.

In the fast evolving cannabis world, it’s imperative that you have an experienced agent in risk management who will understand, and cover the nuances and risks associated with your unique business’s growth.

While choosing an Insurance partner, these are the factors to Consider

Choose the right broker
Your broker should have a good understanding of the whole cannabis industry and your specific needs according to your business plan.

How much do the premiums cost?
You should have a good understanding of how much the monthly and yearly cost will be for your coverage. This will allow you plan your long term business projections.

What is the insurance limit?
You should determine beforehand how much coverage you will need. Some of these limits are required by Statute and must be complied with for licensing. Other limits for inventory coverage and Crop Insurance are up to you to determine.

What are the Coverage terms and Conditions?
Because each policy is unique, you should determine what is most important to your business and your unique situation. If you have a savvy agent, they will be able to obtain policies to adequately match your exposures and needs.

What Insurance Policies Do Cannabis Companies Need?

While all businesses have general insurance needs, cannabis businesses have unique risks and exposures that make some policies almost mandatory. We have listed the common businesses in this industry and outlined the different policies that apply to them in the section that follows.

1. Commercial General Liability

General liability is an “essential” for most businesses. This policy covers most forms of liability claims that may be made against you or your cannabis company. This policy is designed to protect your business from loss should you be found liable for bodily injuries or property damage to a third party in the course of rendering your goods or services to them.
This policy will protect your business assets from claims such as bodily injury and damage to property regarding third parties which happen on your facilities/properties. Slip and fall injuries will be covered by GL policy which is typically required when leasing property, contracting with others or even attending a conference.

2. Product Liability Insurance

As an extension of general liability, this subcategory will provide coverage in case a defective product causes damage or bodily injury to a third party and you are found liable for the damage. This is an ever evolving and complicated issue in the hemp and cannabis industry due to the diverse license types and the vertical integration of various businesses.
Product liability will see that you are protected in case the use or consumption of your products leads to unwanted side effects or illness. Any business which touches products irrespective of their position in the supply chain requires a sound product liability policy. When the right contractual language and additional insured status are utilized, your business will get the best possible protection.

3. Commercial Property Insurance

This policy will protect property like buildings, equipment, and personal property the business uses from perils such as theft, fire and natural disasters. In addition, it may cover the loss of income occasioned by these perils. This coverage does not come as a stand-alone policy; however, it can be incorporated into the larger business’s property insurance policy.
In the cannabis industry, this is crucial as often times very expensive equipment is utilized which may cause insurmountable losses in the event of loss. Insurance of your finished inventory is also key. It is your business’ lifeblood, with no inventory you have noway to produce revenue.

4. Crop Insurance

This ensures that your crop is protected throughout its growing cycle. The cannabis crop is protected against both indoor and outdoor hazards such as soot, temperature, fire and flood. It is important to note that the coverage will not extend to crop failure occasioned by rot, disease, mold or issues of fertilization.
Using both the crop and property policies together will help you mitigate a large portion of your risk.

5. Director’s & Officer’s (D&O) Policies

This policy covers damages (settlements and awards) arising from allegations, wrongful acts and lawsuits levied against the officers and/or board members of your cannabis company during their tenure. As many companies in the cannabis industry are funded by VC/PE funds, angel investors and family offices, investors find companies with this type of policy very attractive because of the ever shifting legal cannabis landscape and the coverage that such policies afford their assets and themselves.

6. Employee Protection Liability Insurance (EPLI)

As your company grows, you will find that your need for this policy will also grow. EPLI will offer protection to your business against potential employee-related claims which include harassment, discrimination, wrongful termination and failure to promote. D&O and EPLI can be put together to create a Management Liability policy as often you will find that these claims are interrelated. The combined policies will provide coverage for your C-suite.

7. Workers’ Compensation Insurance

This policy covers employees from injury or illiness in the daily operations of your business. Lost wages and medical care will be paid by this insurance in case one of your staff gets injured at the workplace. In addition, in order to conduct business in Washington DC and all 33 states that have cannabis laws in place, you are required to have this policy in place.

8. Cargo Insurance

In the event that your cannabis product is damaged, stolen or lost during loading, in transit, or during offloading, this policy will compensate you for the loss. A good Cargo insurance policy will cover both goods being transported by yourself or a transport company you have hired.

9. Software Insurance

As technology is intricately integrated into almost all cannabis businesses such as inventory and testing lab records, “medical” licenses, PII and HIPPA regulations, your business is liable legally to protect all data and mitigate the risk of losses due to data breaches or hacking.
This type of policy helps to mitigate against risks related to data breaches or data loss.
In the case of face-to-face services, it is strongly encouraged that you to acquire third-party coverage for claims against third parties.

Which Insurance is tailored for Which Type of Cannabis Business?

1. Cannabis Dispensaries

In running a successful dispensary business, a robust coverage is of utmost importance given the ever evolving climate. It goes without saying that you will need general liability insurance, workers compensation and property insurances. In addition you might incorporate a Commercial General Liability policy.
In the event of harm or illness caused by a product, products liability is crucial. You should also utilize risk transfer tools like asking your partners for Additional Insured Status.
Most states will require a seed to sale technology for tracking in order to allow your cannabis dispensary to operate. Having a Point of Sale (POS), customer loyalty, and inventory management or delivery service, the use of technology is critical in keeping up with demand and ensuring compliance. An effective “Technology Errors & Omissions and Cyber Liability policy” will help protect you against an array of claims which will keep your dispensary in business.

As a cannabis dispensary owner you should consider having the following policies in place:
General Liability
Product Liability
Property Insurance
Workers’ Compensation
Business Income Coverage
Cyber Liability
Technology Errors & Omissions

2. Cannabis Cultivators

Cultivators face a plethora of perils and risks to their operations, which include damage to crop at different value stages, equipment breakdown, fire, vandalism, weather related crop destruction and theft. Cannabis and hemp growing take a great amount of investment including purchase of equipment, seeds, lighting, seeds and security. Fortunately, investment in a suitable insurance program will ensure your investment is protected.
Property and crop insurance policies are top solutions for cultivators.
Crop insurance is more readily available when plants are in controlled settings such as greenhouses. However, more underwriters have warmed up to covering outdoor crop since the passing of the Agricultural Act of 2018.
A Cargo or Inland Marine policy would also protect inventory that is in transit during interactions with dispensaries and wholesalers.

As a cannabis cultivator you should consider having the following policies in place:
General Liability
Product Liability
Property Insurance
Workers Comp
Business Income Coverage
Crop Coverage
Commercial Auto
Cargo

3. Cannabis Manufacturers

Hemp and Cannabis manufacturers face substantial regulatory requirements based on inherent risks which are as a result of the licenses that they hold. Processing the cannabis flower or hemp usually increases the overall value of the product and significant losses can be occasioned by improper utilization of the whole plant.
A good commercial Property Policy should be put in place to protect manufacturing equipment which is usually a very substantial investment.
You need to specifically list pieces of value on the equipment policy to include their full retail value. You could also incorporate equipment breakdown to further strengthen your policies value.
A product liability policy will protect you in the case of a customer getting sick after using your product. This is may be a mandatory requirement for you to be able to sell your products to dispensaries or wholesale.

As a cannabis manufacturer you should consider having the following policies in place:
General Liability
Product Liability
Commercial Property
Workers Comp
Business Income Coverage
Cargo / Inland Marine

4. Venture Capital Investors

The fast evolving nature of the Hemp and Cannabis Industry attracts investors who identify the opportunity to get in early. Becoming a fiduciary as a result of managing other peoples’ investments carries with it a huge risk.
The Directors & Officers policy combined with the Professional Liability cover results in a policy called VCAP, which is short for Venture Capital policy.
This policy protects decisions made by the VC on the investors’ behalf as well as the individuals making those calls.

As a VC you should consider having the following policies in place:
Workers Comp
General Liability
Directors & Officers
Professional Liability
Employment Practices Liability
Business Income Coverage

5. Landlords of Cannabis Businesses

Landlords operating in cannabis industry space face unique challenges and risks. Since Marijuana is still illegal at the Federal Level almost all of the big name Insurance companies will not touch any business that has any connection with the cannabis industry. This goes as far as canceling Landlords property coverage if they rent space used in any marijuana related industry.
For this reason, it is advisable to work with a broker that is dedicated to the cannabis industry and is therefore accustomed to the insurance industries general reluctance and knows how to work around it.

As a cannabis landlord you should consider having the following policies in place:
General Liability
Property Coverage
Loss of Income
Business Income Coverage

6. Testing Laboratories

Testing labs are crucial in ensuring that quality is maintained in the cannabis industry. However, ever changing federal and state regulations bring about the risk of potential lawsuits. Picking the correct insurance policy will help you transverse these pitfalls. They will also cover you against potential mistakes or errors that happen in your operations. Professional Liability, also called Errors & Omissions is vital for laboratories which report to the state as they impact public safety.
As with the others, Property Coverage is crucial to cover the expensive equipment that runs these cannabis labs.

As a cannabis dispensary owner you should consider having the following policies in place:
General Liability
Property Insurance
Product Insurance
Errors & Omissions Insurance
Business Income Coverage

7. Cannabis Delivery Services

Delivery is key in the Cannabis Industry. Delivery-only dispensaries as well as cannabis delivery service providers (such as EAZE) both face complicated risks. In the event of robbery or accidents while in transit, Personal Auto Insurance does not provide coverage as it excludes business use. In most cases a general commercial auto policy will not cover cannabis related business’s. This means that in case of accidents, your enterprise may be liable for injuries, damage to vehicles and medical bills. Getting a Non-Owned and Hired Owned Policy will improve the management of your risk program. In addition, you can leverage a cargo policy to cover your products immediately they depart from your premises.
In case you are establishing a fleet of delivery vehicles, you will require Commercial auto coverage.

As a cannabis delivery service you should consider having the following policies in place:
Commercial Auto
Hired Owned & Non-Owned Auto
General Liability
Business Income Coverage
Product Liability
Commercial Property
Cargo Insurance
Worker’s Compensation

8. Medical Cannabis Doctors

Physicians who offer Non-FDA medications have a hard time finding proper insurance coverage.
You should find an insurance broker that offers a Cannabis Practice policy to offer protection from malpractice lawsuits filed against medical cannabis physicians.

As a medical cannabis doctor you should consider having the following policies in place:
General Liability
Errors and Omissions / Professional Liability

Conclusion

By 2025, the Cannabis Industry is projected to grow to annual sales of over $146.4 billion. With the growth and regulation of this industry, it will become more important to have the proper insurance coverage to allow you to be competitive in the industry.
In addition, Cannabis businesses face unique risks at any given time. A small mishap without adequate insurance cover can bring your business to its knees in an instant. This usually involves servicing expensive lawsuits or in extreme cases the loss of a business license.
The constantly changing legal status of recreational and medicinal cannabis does not make thing any better. If anything, it creates a legal minefield that requires expertise to navigate.
Now that you have a better understanding of insurance for cannabis and hemp companies, you may be wondering where to go from here. If you need more help or information, you can reach out to our team of expert who will be eager to get you started.

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