Will Cannabis Insurance Providers Protect My Business?
Learn our best tips for selecting a cannabis insurance provider that will protect you from massive financial setbacks and set up the right coverage for your specific operations.
It may seem cost effective to skip business insurance, but this choice can have damaging consequences for businesses of any type. Unfortunately, cannabis businesses have even more risk when they don’t have the right coverage, so you MUST do the research to find the right provider for protecting your assets.
If you still have questions about cannabis insurance after reading this article, send us a message at the bottom to learn more.
With full legalization on the horizon, cannabis insurance has become a hot topic.
Here are a few examples we found in our research:
Example 1: In October of 2017, wildfires burned hundreds of thousands of acres, destroyed thousands of homes, and killed 42 people. It was one of the most destructive fire seasons in California’s history, and this year’s wildfires are shaping up to burn even more acreage.
The California Growers Association confirmed that wildfires destroyed 34 cannabis farms. Property owners were devastated by the significant losses they took, especially since none of them were insured.
Example 2: A cartridge company in California had a product failure that caused injury to a dispensary customer. Regrettably, the company did not carry product liability coverage in California and the dispensary was named in the lawsuit and therefore liable.
If either the company or dispensary had the correct coverage and the guidance of a qualified insurance professional, the insurance would have been set up to cover damages, medical costs, business interruption, and even legal defense costs!
Cannabis is still a relatively new industry.
Cannabis businesses deal mostly in cash because of federal regulations, so it’s common for these businesses to become targets of crime or fraud. Only within the last few months has California’s Insurance Commissioner passed a program to allow their businesses to receive insurance policies to protect their assets.
If you own cannabis real estate, are searching for a 420 property, rent to a cannabusiness, or own or are employed by a cannabis business, you absolutely want to protect yourself from possible setbacks by having comprehensive, affordable cannabis insurance.
Understandably, many people seeking cannabis insurance aren’t exactly sure how to go about finding and comparing coverages. They have a myriad of questions they need answered before choosing a broker or company. It’s important to have the most up-to-date information when doing your research.
In this article, we will run through common questions folks have about cannabis insurance providers.
Cannabis Insurance Q/A
Learn more from our research on the currently available insurance for cannabis businesses. We hope that this information will help you make the right choice when talking with an insurance professional. There are many types of insurance and new providers entering the market who may not have enough experience.
How is cannabis insurance different?
Cannabis insurance is specifically tailored to meet the ever-changing needs of the cannabis industry.
The main difference from traditional insurers is that cannabis insurers do not exclude cannabis activities from their policies, whereas non-cannabis insurers purposely exclude coverage for all cannabis-related activities.
There is understandable hesitation for insurance companies to include cannabis activities because cannabis is still a relatively new industry, and at current, is federally illegal. Fortunately, a number of companies have committed the time and investment to understand and insure cannabis businesses / properties as more states legalize cannabis every year.
For example, if you have insurance on the property, then the occupancy/use is changed from an “everyday” tenant to one in the Cannabis Industry, that is a “material change in risk” that must be disclosed to the insurance company in order to comply with the provisions of the policy. If you are not aware of this or fail to disclose this change, the carrier may contest or deny a claim stating that this is not what they were told they were insuring.
Be careful that the insurance company (carrier, not just the broker) really knows what the property is used for.
As a landlord you want to cover the liability for operating the property, and make sure that your cannabis tenants are properly insured both for themselves and for your liabilities. You will want “premises operations” coverage for the ownership liabilities, and it is critical to verify that the tenants have proper coverage naming you, the Landlord, as “Additional Insured”. That is Standard Operating Procedure for tenants, as they are responsible for what happens inside of their lease space, and your lease should require this.
That type of coverage is not expensive for the cannabis tenant. The highest premiums facing tenants are for their own Products Liability which is a different issue for them to cover and not you.
As a buyer (and owner) – if you have a loan on the property, the lender will require proof of insurance before they will close, and you want to protect your investment just as you would a home.
What types of insurance are available for a cannabis business?
In total, there are about 12 different types of insurances for cannabis businesses.
- Business Property (theft, vandalism, fire)
- Product Liability
- General Liability
- Employment (Workers comp, unemployment, disability, etc)
- Commercial Auto Insurance
- Business Interruption (natural disaster or unexpected emergency)
- Professional Liability or Errors and Omissions
- Legal Defense Costs Reimbursement
- Crop Insurance
- Directors and Officers Liability (protect your board of directors in case they are sued)
How much does cannabis insurance cost?
There is no set answer to this question, as insurance costs vary from business to business and property to property. However, there are insurance programs available that start around $1500 a year and increase from there based on the type of coverage desired and volume of business.
The majority of the liability premium is based on gross projected sales, while premiums for property insurance are based on the size, quality, age, and condition of your building. We can help you get a quote at the end of the article.
What types of questions should I ask my insurance agent about cannabis?
Having these questions ready for your insurance agent will help you feel prepared and provide basic answers to jump start your process.
- What is your company’s current experience in providing cannabis insurance?
- What are my choices for the deductible and how will if affect the premium?
- What types of coverage does your company provide?
- What is your company’s policy on federal vs. state issues?
- What state are you located in? This is an important question to make sure the carrier is able to insure businesses in your state.
- Can the policy grow with your company? (Ask about bundles, upgrades, etc).
Can one company provide insurance for all your businesses?
Yes, picking one company that can provide coverage for all aspects of your business insurance needs will increase the breadth and coverage of your insurance, can reduce premiums with bundling, and will simplify renewals or filing insurance claims.
Insurance Commissioner Dave Jones spoke these words in a current article describing a company in California and providing the green light to insure cannabis companies:
“Consumers who visit cannabis businesses, workers who work there, businesses who sell products to or rent property to cannabis businesses, and the investors, owners and operators of cannabis businesses all should have insurance coverage available to help them recover when something goes wrong just as any other legalized business does.”
Will my property be more valuable with cannabis insurance?
It is important to have property insurance coverage on your property, regardless of your industry.
Buyers often require that a company has the proper business insurance coverage in place before purchase. Waiting to place coverage on the property or business until it is being sold can be cumbersome, and delay or cause the sale to fall through.
Meanwhile, finding someone to invest in an uninsured cannabis business can be nearly impossible. Don’t make a rookie move. With the range of coverages and carriers available today, and competent professionals to guide you through the process, we highly recommend you don’t let your property or business go uninsured or underinsured.
Insuring your business protects the investment and adds value to your business. Learn how a cannabis consulting company can help your business.
How do I find insurance through a reputable company?
At CREC, we take pride in our institutional reputation and network. Just like our CREC-Certified properties, we present only the best options for people searching for 420 properties so they may source the most viable properties for legal commercial cannabis. We also work to ensure that you have trusted insurance partner recommendations.
During our research for this blog, we discussed the vast details of cannabis insurance and learned a lot of this information from NFP, a highly regarded nationwide insurance provider.
Why we recommend NFP:
NFP has been successful in cannabis insurance because they provide insurance for more than just cannabis businesses and property owners. The firm has been in the commercial insurance business for decades, and their experience and market reach enables them to understand business insurance in general and cannabis insurance specifically.
NFP is a leading insurance broker and consultant that provides employee benefits, property & casualty, retirement and individual private client solutions through its licensed subsidiaries and affiliates. Their solutions and expertise are matched only by their personal commitment to each client’s goals.
We recommend you give Jason Kunz a call at 360-523-9113 ext. 508 or visit NFP.com to request a quote on cannabis insurance.
This type of experienced insurance provider will understand your needs as a cannabis company, so your liabilities are not overlooked for both commercial property and cannabis insurance. Companies that can insure cannabis businesses are currently in high demand, providing coverages to the hundreds of new companies joining the market every day. We believe NFP is a great example of a large company with local brokers that can help with your property or business insurance and answer your insurance questions.
You need a company you can trust to present you to an insurance company and help you design the appropriate coverages for your property / business. Please use the questions we mentioned above to help evaluate your future provider’s knowledge base and ability to assist.
What is the future of insurance for cannabis businesses?
With the trend of cannabis approval in numerous states, and popular opinion rising consistently, it makes sense that companies that serve the industry will develop and become more specialized. An NFP representative shared with us that they believe most insurance companies will provide cannabis specific insurance in the future, making it more competitive and easily accessible.
Getting insurance to protect your company is smart, but cannot protect you from every situation.
Finding an insurance company you feel comfortable with to protect your business, your property and ultimately the success of your company is key. If you find an insurer who understands the fast-paced evolution of the cannabis industry, you’re on the right track to protecting everything you work so hard for.
DO YOU HAVE MORE QUESTIONS?
We are happy to continue the conversation and get you in touch with a trusted insurance provider.
You might be surprised at the many ways you can add more protection for your cannabis business assets and how insurance can help prevent vulnerabilities in a market that continues to become more legitimate.
Ask us anything!
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