With more states moving toward legalizing marijuana, entrepreneurs are finding new opportunities in the cannabis field.
Growing cannabis commercially can be a lucrative business, but proper insurance coverage is essential to protect against risk.
Many farmers and ranchers take out crop and livestock insurance, and the cannabis industry now has its own form of crop insurance that is tailored to address the unique risks that these crops face.
Although the concept may sound straightforward on the surface to those who are already familiar with traditional crop insurance, there are a few things you should know about cannabis crop insurance.
Indoor Growers May Have More Insurance Options
Those who grow their cannabis inside of an enclosed facility often face extra production costs on account of building maintenance, power, security and nutrient feeds.
However, growing cannabis indoors in a greenhouse or other type of custom-built space can be an advantage from an insurance standpoint thanks to the more controlled environment that such facilities offer when compared to outdoor growing operations.
Although there is still a possibility that significant crop loss can occur, insurance packages can easily cover risks like fires and crop contamination.
Outdoor crop coverage, in contrast, is very limited at the moment. However, this area is starting to grow, and more insurance companies are providing outdoor crop insurance as the industry evolves.
Being Prepared Can Pay Off
To keep insurance quotes down, growers should be prepared to present organizational and operational data to their insurance brokers.
This is especially true of indoor growers as providing information such as humidity levels, soil conditions, nutrient levels, air temperature, supervision and sheltering allows insurance brokers to better account for the various factors that impact risk.
Many insurance brokers use data such as the estimated number of harvests each year, the average wholesale value of the plant, the number of plants at various stages of growth, and how many ounces are produced per plant to determine the insurance price.
It Covers More Than Just Crops
Many people believe these products only protect the plants as they are actually growing. However, cannabis crop insurance covers the plants in three different growth stages, running from seed to sale.
All of the living plant material, including seeds, marijuana plants that are in the vegetative growth stage, flowering mature plants inside the growing medium and immature marijuana seedlings are all covered.
It also covers harvested mature plant material that is not sitting in the growing medium, such as any harvested plants that are undergoing the drying and curing processes.
In addition, crop insurance covers finished stock, which is mature marijuana plant material that has been processed fully and is ready for sale.
It Covers Against A Broad Range Of Potential Dangers
Cannabis crop insurance offers protection and peace of mind for a broad range of potential dangers. Adverse weather such as hail, windstorms, and lightning can cause serious damage to crops, but this is not the only concern growers face. Explosions and smoke damage are other possibilities.
Automated fire safety systems could leak onto the crops and damage them, as can heating and air conditioning, and accidental plumbing discharges are also accounted for. In addition, cannabis crops tend to attract thieves and vandals, and crop insurance provides an additional layer of protection.
It Is Not Necessary – But It Is A Very Good Idea
Having cannabis crop insurance is not technically necessary in most of the states that allow cannabis products to be sold.
Nevertheless, experts strongly advise growers and other cannabis-related businesses whose livelihoods depend on the successful growth and cultivation of marijuana to get this type of policy.
If something happens to the crops that was outside of your company’s control, it will provide financial coverage not only for lost profits but also the replacement costs involved in planting new crops.
You Also Need Product Liability Insurance And Workers’ Compensation
In addition to crop insurance, cannabis businesses should take out product liability insurance. This can account for product liability exposures related to vaporizers, label claims, edibles, pesticides, misrepresentation, failure to warn, mold and fungus, and other deceptive practices.
It is also important to take out a workers’ compensation insurance policy to ensure you can compensate employees who are injured or become ill on the job.
Other types of insurance that most cannabis-related businesses find useful include cyber liability, general liability, excess liability and equipment breakdown.
Reach Out To The Cannabis Crop Insurance Team
Without proper coverage in place, losing your crops can be financially and emotionally devastating. Find out more about how you can get the right insurance to protect your livelihood by reaching out to the cannabis crop insurance professionals at MFE Insurance Brokerage.
Although this is a relatively new area of business, we already have significant experience working with companies within the cannabis industry to provide them with maximum protection against all manner of risk.