Cannabis aka marijuana is a hot topic right now. With 7 new states set up to vote in November for some form of cannabis use this is becoming a trend among states. Twelve states plus Washington DC have voted and passed the right for recreational use of marijuana if you’re over the age of 21. Thirty states with Oklahoma being the most recent have passed bills allowing the use of marijuana for medical purposes. With these laws changing we are seeing a new industry bud (no pun intended) and with that comes all the items that new business need to be successful.
Cannabis insurance or marijuana insurance for a grower or a cultivator is not as expensive or complicated as you might think. In fact if you’re working with an experienced, commercial insurance provider it can be pretty simple.
The top question I always get when working with new cannabis growers getting into medical marijuana is “What kind of insurance do I need and what is this for?” For medical marijuana growers my answer is always the same- coverage is going to depend on what is important to you to protect and what is required, but I can tell you what is typically recommended for marijuana grower insurance is going to cover and protect your interest, liability and needs as a business.
The most common types of insurance that we see for marijuana growers are the following
- General Liability
- Product Liability
- Loss of Income Coverage
- Property Coverage
- Inventory Coverage- can include coverage for the crop through the three stages of growth from seed to sale.
What do all of these do? Great Question.
General Liability is going to protect you against basic business practices that normally occur-hence why it’s called General Liabilities. This may be if someone trips and falls while walking into you building or it may be defending you in a lawsuit if your business is sued. For Oklahoma marijuana growers most landlords will require you as a tenant to have this coverage.
Product Liability is going to protect you against claims that may come from from the sale of your product. For growers this may come months after your product has been taken and sold. An example may be a person using medical marijuana suffered a medical issue and they trace it back to your product. Product liability is going to protect coverage as long as it’s covered under the policy.
Loss of Income is going to protect your revenue coming in and out of the door if a covered loss occurs. This is such and important coverage. If a fire occurs and damages part of the building and you’re unable to operate how to you keep the business afloat? Without this coverage its estimated that if a business has to temporarily close 76% of businesses will not reopen. Loss of income coverage will give you that revenue that you need in order to keep the doors open.
Property Coverage is going to protect structures or improvements that you’ve made to a space. You may not own a building, but you’ve paid to construct a build out to make the space better for your business. Often these build outs are expensive and many people will choose to insure the amount they’ve improve the space. Even if you don’t own the building many property owners will require a tenant to insure the building in something called a triple net lease. A triple net lease requires a tenant to insurance the full building to the property owner’s specifications.
Inventory Coverage is going to protect all the product that you have on your property. This may be seeds, this may be buds, it may be harvest plants, or it could be finished stock. Regardless your inventory is what you sell to make money so it’s important to protect it adequately. Curious what your stock would be protected against? Here are some common items. If you’re curious about another just ask
- Hail or windstorms
- Leakage from automatic automated fire safety systems like sprinklers
- Water damage from air conditioning and heating devices, as well as plumbing accidental discharges
Insurance typically will have some requirements prior to letting you put a policy into place. Those restrictions are below
- You must have a licensed electrical contractor approve the building is adequate for your business operations; this includes looking at the power source and number of circuits. The contractor must provide a letter of approval that is required at the time the insurance policy is put into place. This is non-negotiable and the electrical system needs to be maintained in order to meet insurance requirements.
- A security system must be installed and operational, including a burglar alarm that reports to an outside monitoring station. This means if a break in occurred the police station or third party would be automatically be notified. As with the first requirement, this system needs to be maintained and in proper working order at all times to ensure insurance compliance.
- If you are requesting coverage for finished stock/inventory, you must have a TL-15 or ½ ton safe bolted to the floor (if less than 900 lbs) and motion detectors must be installed in the safe room location. If not requesting coverage for finished stock this is not required.