What Types of Insurance are Available for Cannabis Extraction Labs?

Written by Tyler Cline

September 25, 2020

Insurance for Cannabis Extraction Labs is critical to prevent unexpected loss to your building, equipment, or transportation issues.

There are a multitude of features & benefits in obtaining insurance for your cannabis-related business. Most don’t even realize at this time that there are Cannabis specified insurance plans and packages that are tailor-made for these types of companies. When you break it down there are really (3) main business types in the cannabis business sector with various jobs branching from there.

These are the Grow op itself for medical or recreational marijuana and/or Hemp and CBD. The Cannabis Extraction Labs also known as (MIP) on the THC side of things, whether this is for testing, formulation, or extraction THC, CBD, or other various cannabinoids. And last but not least, the Retail Shop or Dispensary.

Cannabis insurance covers the seed to sale basis and this model is also a great example of what vertical integration really is; essentially having a company that has a grow, lab and dispensary of its own to supply its own supply chain = Vertical Integration (Maybe the most overused word in the industry) as it’s everyone’s goal to get to this point. These companies know firsthand just how much capital it really takes to get just one of these businesses off the ground. It is important to not overlook getting insurance for your MJ/MMJ Grow, your extraction or testing lab, and/or your dispensary or CBD retail shop. Whatever stage your at with your cannabis-related business there is insurance for you available through Cannabis Insurance Business. You don’t want to dump money into a business without protecting yourself financially. Like any other business, as a cannabis grower you want to be fully licensed AND insured!

The benefits and features are broad and can be as protective or as minimal as needed or desired. The biggest prevention of people committing to cannabis insurance is cost and/or lack of knowledge, they are afraid to ask in some cases. The good news is over time cannabis grow insurance premiums have come down as more carriers compete and come into undercut prices and earn business.

It is critical to work with an insurance broker who works in the cannabis space. They can work this to your advantage every year to make sure they get you the best deal available. They don’t want to lose your business either!

Most cannabis extraction labs will start by targeting General Liability which is the basis of commercial insurance.

This is packaged with the Products Liability insurance for cannabis products also known as (GL+PL) in insurance terms. Any lease, trade show, sales contracts, etc. will require this kind of insurance. This is the first place and stage of insurance that is validated by any other business that considers doing business with you. This is also a neat way to vet out a company to see if they are credible and protected to do business with.

General Liability covers the basis of slips trips and falls within premises including bodily injury, Personal and Advertising Injury, employee benefit claims, medical payments, and hired and non owned auto. This typically comes in 1Mil/2Mil split limits meaning 1Million in max limits per occurrence and 2Million max limits for aggregated loss that takes place over time. These are typically on claims made forms so in Layman’s terms “ you have to make the claim within the effective policy period” This coverage is also rated off GROSS revenue so the more product pushed and sales made, the higher the risk and premium will be. An audit will take place annually to check and balance the costs of insurance to the risk rating.

Commercial Property/Crop Insurance whether tenant or business owner covers an array of things. The first thing that comes to mind is the building itself; we rate this off 100$/Sq Foot for reconstruction costs for building owners. If you’re a tenant we always use the example “cut the roof off and empty everything out” which is what we would be insuring anything that falls out.

The true coverage options are: Building Coverage, Loss of Income, Business Personal Property including equipment, indoor or outdoor grow equipment, tenants improvements, completed stock and goods in process for inventory, Bailees which is stored product non-owned or in transit product non owned. Crop coverage for marijuana or hemp is also inclusive to this line of insurance as crop is seen as property.

The only curveball here is that you’re required to have a Central Station Alarm on a payout for something such as theft taking place. The insurance company refers to these as protective safeguards. This is rated off (TIV) which means to insurance value so the higher the limits the higher the premium as it is based on what the insurance company is insuring on.

Workers Comp Insurance is for any W2 employees or anyone on payroll. This is typically required depending on the state and protects the company from being sued if an employee were to get hurt on the job and sue the company for the losses. Someone at the end of the day must pay the medical bills if an employee suffered a loss. Workers Comp comes in to save the day with this coverage as we typically start at 1million limits. This is also the most affordable line of insurance for the cannabis sector. Unfortunately, there are very few carriers participating in this coverage area, but more to come in the near future!

Transportation and Delivery Insurance is for any stage of transportation; from grower to lab, lab to dispensary, or dispensary to client/patient. This covers the product being transported, the vehicle involved as well as the driver themselves for injury. This will become more predominant once interstate commerce opens up and cannabis becomes legal on a national level. Corona Virus and the Pandemic really elevated the need for transportation of product and delivery increasing the need and demand for this kind of insurance.

In states such as Colorado, you can order product online and have it delivered to your door, this is becoming more popular with the economic times and the new approach with social distancing as each dispensary is handling this differently. This can protect your product, your driver, and their vehicle whether owned by the employee or the company.

Ready to learn more about insuring your cannabis & hemp products? The contact us at (720) 999-3345 or at info@CannabisInsuranceBusiness.com. You can also learn more about CIB at https://cannabisinsurancebusiness.com/about

Colorado-based and pushing the industry further one step and state at a time. Proudly serving all 50 states.

Contact Cannabis Insurance Business or call 720-999-3345 to start protecting your investments today!

Pushing the industry further one step and state at a time. Proudly serving all 50 states. – Cannabis Insurance Business of Loveland Colorado

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