In a cannabis grow, there are risks you simply cannot avoid. Thus, it is important for every grower to understand and engage in proper risk management, which is the process of identifying the risks you face, and developing a plan to survive them. One of the key pieces of that plan is typically insurance, which covers losses that are high severity in nature — the losses you really can’t afford to pay for yourself and that don’t happen frequently.
Insurance for a grow operation consists of many different components — coverage of the growing crops, buildings or structures, liability related to the sale of your product, and coverage for injuries sustained by your workers.
Wildfires approach Uncle Buds, a licensed marijuana farm, in the summer of 2015. Although fires burned much of the region, Uncle Buds survived the danger.
According to Cannasure Insurance Services, there are three stages of the grow process that can be insured:
– Living plant material: Seeds, clones and mature marijuana plants.
– Harvested plant material: Mature marijuana plant material that has been harvested and is in the drying and curing process.
– Finished stock: Mature marijuana plant material that has been completely processed and is ready for sale.
The insurance available for these stages of the grow includes coverage for lightning, theft, fire, explosions, hail, windstorms, vandalism, smoke, leakage from automated fire safety systems and water damage from HVAC or plumbing systems. The promises and conditions insurers require before providing coverage for a grow operation are of considerable importance. You’ll need to know about these and prepare for them ahead of time.
First, your facility must be inspected by a licensed electrician to make sure the electrical system is adequate to power the necessary lights, ventilation systems and other equipment. Typical buildings are not always equipped to handle the electrical needs of a cannabis grow, so an inspection will let you know if the building can meet the electrical requirements in order to operate safely.
Another condition is a security system that is wired to an outside monitoring station. One of the biggest risks in the cannabis industry is theft, and to protect against it you must have a security system. Most insurance policies become null and void if, at any time, the security system is not functioning correctly. It is important to make sure this system is installed and wired properly and that the monitoring service is reliable.
Finally, if you are going to have coverage on finished stock, you’re usually required to have a safe, which must be of a certain size and weight to be acceptable to the insurer. Typically, the safe must be a half-ton or have a TL-15 rating. Before you buy a safe, check with your insurer to verify that you’re getting one of the proper size and specs. You’ll also be required to have motion detectors in the safe room.
If you are building a facility from the ground up, all of these requirements can be easily incorporated into your building plan. If you are using an existing facility, you may have to invest in some upgrades and remodeling to meet the requirements your insurer.