Cannabis Crop Insurance: What You Should Know about Securing Indoor and Outdoor Coverage

If you grow cannabis commercially, it’s becoming more and more crucial to secure proper business insurance for your crop.

There are plenty of risks that can wreak havoc on business owners that grow product, including damage caused by fire and smoke, flooding and electrical hazards, and mechanical breakdown of equipment that’s needed to regulate the growing environment and temperature of the crop.

The biggest challenge these business owners face in securing the proper coverage, however, is often based on the literal location of their operations.

Indoor Cannabis Insurance Factors

If you grow cannabis inside an enclosed facility, like a greenhouse or a custom-built space, your production costs will be higher. Overhead expenses like power, building maintenance, security, nutrient feeds and supervision will undoubtedly take more from out of your bank account.

The good news is that growing cannabis indoors is an advantage for a majority of cannabis insurance providers. Indoor grow-ops have more insurance options right now because of the controlled environment they sustain.

While the potential for losing a good chunk of crop certainly exists if something were to go wrong inside the building, insurance packages are readily available to cover things like crop contamination, fire and other possible risks.

To help drive down the cost of an insurance quote, business owners should have an abundance of organizational and operational data. This includes knowing the air temperature to humidity levels, soil condition, how much nutrients the plants are receiving, sheltering and supervision details of the crop and so on.

With this data, insurance agents can help reduce exposure to unknown and outside factors.

Outdoor Cannabis Insurance Factors

If you grow cannabis outdoors, your exposure to risk increases dramatically.

If a cannabis company has a bad streak with local weather, their total seasonal yield could be deeply affected.

There are even more wildcards at play that could seriously set back a cannabis yield if you grow outdoors, including:

  • Unexpected weather fluctuations and storms—heat waves, dry spells, snowfall, windstorms, etc.
  • Accidental chemical exposure, like pesticides and sprays
  • Unwanted visitors, theft of product, even unintentional damage to the yield of the crop from improperly trained staff
  • Incredibly strict testing requirements in California—a number of pesticides, heavy metals and range of other factors will deem crop non-compliant

In addition, as climate challenges continue to plague farming and agriculture in the coming decades, the cannabis grower will also need to adapt to this evolving risk.

There is one big advantage that the outdoor cannabis cultivator has going for them: a lower overhead cost.

With both light and temperature provided for free and regulated naturally, the outdoor grower of cannabis can make more money than the indoor operation if weather permits.

Insurance Coverage for Combined Indoor/outdoor Cannabis Operations

While the insurance model for outdoor farms and agricultural growers has existed for decades, the industry hasn’t caught up to the new legalization of cannabis.

The majority of insurance providers today—even cannabis friendly ones—are NOT covering the crop for outdoor growing facilities. As of today there is 1 cannabis insurance carrier that is covering outdoor crop coverage.

Since the insurance business is all about mitigating risk, it’s only natural that the providers are more relaxed with the safer indoor model of cannabis production.

As time goes by, however, there will be an increasing amount of outdoor cannabis production, and insurance packages will start to more regularly accommodate these business models.

Securing the Right Coverage

Cannabis business owners need to ask appropriate questions about insurance coverage, in particular whether the insurance provider has different risks and premiums for outdoor and indoor cannabis growers.

Ask questions regarding:

  • How they rate the risk factors
  • If they provide coverage for outdoor cannabis farms
  • How they come up with a fair and reasonable evaluation of risk
  • If there’s a major price difference between insurance values for horticultural or fruits and vegetable farms compared to those growing outdoor cannabis products

The more you can build a case that your cannabis operation has done everything within reason to mitigate risks, the greater the likelihood of reducing your insurance premiums.

Stay posted for more developments as they emerge. I am active in the industry and work with a number of cannabis business professionals to ensure they are on the right track and have the necessary resources and information to succeed.

Have questions or concerns about your cannabis business? Please contact me via email or give me a call at (626) 535-1480.

About Corey Tobin

With close to a decade of industry experience, Corey has worked with a number of small and medium-sized businesses and is knowledgeable about property and casualty, life and health insurance. Corey specializes in working with elevator contractors, manufacturing, distributing, healthcare and construction. Additionally, he is focused on the unique needs and challenges facing cannabis related business, including dispensaries, cultivators, extractors, developers and much more.

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