Marijuana is getting legal status in many states in the USA. As with any legal and regulated business, marijuana business owners need insurance. However, just because you need insurance does not mean you can get insurance. Currently, many traditional insurance companies will not issue insurance policies to marijuana businesses.
New marijuana-specific insurance companies have risen to meet the demand for insurance in the industry. The marijuana industry like other industries needs protection against any risks like financial help in case of loss, theft, damage to property, or equipment. This article will discuss what we believe are the 7 types of cannabis insurance you should consider for your marijuana business.
Factors to consider before taking insurance
Risks in the business
There are different risks associated with different marijuana businesses. If you are a marijuana grower, you will not need the same insurance as a provisioning center. Therefore, it is important to understand the risks associated with your business, in order to adequately insure your business. The right type of insurance will protect your business from the losses associated with your specific marijuana business.
While you may know a lot about the risks involved in your marijuana grow, provisioning center, processing, transportation, or testing facility, you probably do not know as much as licensed insurance professionals. Specifically, insurance professionals offering marijuana-specific insurance. Make sure to do your research before considering insurance, as well as shop around, but make sure you do take into account the opinion of a licensed insurance professional.
8 types of Cannabis insurance suitable for cannabis companies
- Commercial General Liability Insurance
Commercial general liability insurance is what most people think of when you say commercial insurance. It protects against exactly what it sounds like it protects against, the general hazards associated with conducting business. This type of insurance will be appropriate for any and all marijuana businesses. It gives protection to marijuana business owners against all general risks including potential damage to the property.
Commercial general liability insurance provides blanket coverage for potential claims for injuries to workers, your property, patrons, and much more. This insurance will protect your business from losses associated with conducting your business and is recommended for all businesses.
- Worker’s Compensation
Workers compensation insurance protects the employer in the case of an employee injury while in the workplace. This type of insurance is recommended for most businesses as an employee injury on company grounds could end up costing the employer a lot of money. However, some businesses like a provisioning center have little risk of on the job injury since there is not much physical labor or danger involved in the job description.
While it is always advisable to carry insurance to avoid the risk of a hefty payment later, there are ways around worker’s compensation insurance. In most other industries ways of getting around worker’s compensation insurance involves hiring your employees as independent contractors. However, this is not a catch-all solution and your relationship with your employees will be investigated to determine whether or not they actually meet the definition of an independent contractor. The best advice we can provide with procuring worker’s compensation insurance is that if you dictate your employee’s schedule and they are not sufficiently “independent” protect yourself with a worker’s compensation policy.
- Crop Insurance
This is the type of cannabis insurance is one we emphasize for marijuana growers. If there are any damages to the crops, the marijuana growers get the financial help. It also covers the risks facing crops from natural disasters such as heavy rain, drought or famine. While Michigan marijuana grows are primarily conducted indoors, you are still considered a “farmer” for lack of a better word. Not insuring your crop is just foolish. That would mean you as a grower would have absolutely no protection in the case of a loss. If the crop is your first crop, you could be risking the entirety of your business. Crop insurance is also applicable in the case of seeds and harvested crops.
- Vehicle Insurance
This insurance applies to many vehicles such as trucks, cars, and motorcycles. It provides the financial help in case of physical injuries caused by road accidents. This will be especially helpful to testing facilities and secure transporters. Driving in the United States is very dangerous and accidents happen very often. If your employees are operating company vehicles it is very important that your vehicles be insured against potential losses. Specifically, Michigan requires insurance and with our no-fault insurance laws, even one accident could cost you more money than you would care to spend.
Automobile insurance also protects your vehicles in the case of theft or damage. This insurance is highly recommended for an marijuana business that would have any vehicles. However, this insurance could be a bit harder to procure as traditional insurers are not going to insure vehicles associated with marijuana. Specifically, many traditional insurers consider marijuana too high risk, especially when in addition to vehicle and driver safety, the insurance company has to think about potential loss to high value cargo. Insurers in the marijuana industry have developed techniques to address, marijuana specific concerns and most of those techniques are focused on the minimization of exposure for the insurance company, which means capped policies.
- Property Insurance
The 5th recommendation for marijuana business owners is of property insurance. This type of property insurance would cover additional risks not covered by the commercial liablity insurance mentioned first. Property insurance can cover your property from a multitude of risks including natural disasters, internal failures, AC/heat, theft…etc.
Property insurance can act as a catch-all for those already carrying general liability insurance. While it may seem like overkill on top of general liability, property insurance can protect your business from very costly risks that are part of owning a property, but have nothing to do with your commercial practices.
- Cargo Coverage
The next on the list is Cargo Coverage insurance. This insurance really is relegated to those shipping their product around. Shipping in Michigan using trains or trucks can get dangerous, and as discussed earlier, auto insurance in the marijuana industry is generally capped. Therefore, as a business owner the capped policy may not protect the total value of the crop you are shipping. Cargo insurance offers the added protection to cover your entire shipment, and could even require less coverage from your auto insurance.
This insurance is recommended to large facilities that are constantly transporting large quantities of marijuana. The added cost in addition to your auto coverage is immensely valuable when considering the potential loss associated with even a single shipment loss. Total loss of a shipment could amount to hundreds of thousands of dollars lost. As such cargo insurance is recommended to those that can secure it.
- Equipment Insurance
This insurance is needed by marijuana growers and processors. Under this insurance, the marijuana owners get protection in case their equipment is damaged. Processors and growers use a lot of equipment in their facilities, especially larger operations. Some facilities depending on approach to growing and processing can have very expensive and intricate systems at work, as such insurance protecting the owners from loss of equipment is necessary to ensure the success of the company.
It is not uncommon for growers to be targeted for theft, this type of insurance also covers the equipment that is lost to theft. Under this insurance, the owners will get the repair expenses in the case of damage or replacement costs in the case of damage.
Equipment insurance and property insurance provides additional coverage and acts as a fail safe for anything that would not be covered by property insurance. Some insurers will offer equipment coverage as part of their property insurance policy.
Every marijuana business owners needs will be different according to what type of business they own. The above recommendations provide as complete a picture of what type of insurance is appropriate for each business as well as what each insurance offers protection against. These insurances will help the marijuana business owners conduct business in a safe and protected manner. Marijuana insurance is still a relatively new development, as recreational marijuana becomes more prevalent in the USA, we expect more insurers to enter the marijuana industry.