As more states legalize medical cannabis, recreational cannabis, and hemp, companies involved in the industry need to find real estate and property insurance options that protect them from things like fire, theft, vandalism, and floods.
Since the federal government hasn’t legalized cannabis, yet, businesses in some states may find it difficult to find the property insurance that they need to protect their companies. The industry, however, is changing quickly. That means that existing and new companies have more options than ever.
Why Many Insurance Companies Don’t Want to Work With the Cannabis Industry
Insurance companies stand to make a lot of money working with the cannabis industry, yet many of them don’t want to work with businesses that grow and sell products like cannabis flowers, THC concentrates, and CBD oil.
Insurance providers have plenty of reasons to stay away from cannabis industries. Although President Trump has gone on record saying that he believes states can make their own laws regulating cannabis and hemp, former United States Attorney General Jeff Sessions has a long history against tolerating cannabis legalization.
Frequent changes within the U.S. Attorney General’s office makes it risky for insurance providers to work with cannabis and hemp businesses. Without certainty from the federal government, many providers decide to stay away from the industry, even in states that have legalized cannabis and hemp.
Some insurance providers also see the cannabis industry as a high risk because many banks won’t work with the businesses. When banks won’t let cannabis businesses open accounts, growers and retail stores are forced to work in a cash market. Keeping large amounts of cash on location makes insurance companies question whether they want to provide property insurance coverage to these businesses.
Recent Changes in Cannabis and Hemp Property Insurance
Any opportunity to increase revenues will temp some insurance companies to work with the cannabis and hemp industries. In fact, dozens of companies already offer a variety of insurance options for growers and retail stores. Overall, though, the industry still struggles to find legitimate coverage for locations around the country.
Recent changes within state and federal governments, however, are making it easier for insurance companies to offer property insurance to hemp and cannabis businesses.
Since the beginning of 2017, Dave Jones, California’s Insurance Commissioner, has talked about reforming the insurance industry so providers can work with the cannabis industry more easily. In 2018, Commissioner Jones approved a policy that would improve the insurance options available for cannabis dispensaries, processors, storage warehouses, and growing operations.
Hopefully, the changes made by Commissioner Jones in California will lead to improvements in other states that have legalized cannabis for medicinal or recreational consumption.
The hemp industry got a huge boost when Congress passed the Hemp Farming Act of 2018. Prior to the act, the federal government considered it illegal to grow hemp. Some states started pilot programs for farmers that wanted to test the market for a new cash crop, but those states only gave a small number of licenses to farms.
The Hemp Farming Act of 2018 makes it legal for farmers to raise hemp throughout the country, which should put more insurance companies at ease.
Finding a Commercial Insurance Policy for Your Business
Several factors can influence the type of commercial insurance policy that your business needs.
Dispensaries and farms, for instance, need different types of coverage. A dispensary’s policy will need to cover things like property damage, theft, and liability when someone gets injured in the store. A farm or grow operation, however, should have a policy that protects it from insect damage, floods, droughts, crop diseases, and destructive weather.
When exploring options, make sure insurance providers know whether you own or rent:
- Retail space for selling cannabis products.
- Farmland for growing hemp or marijuana.
- Indoor commercial facilities for growing hemp or marijuana.
- Storage facilities for storing products and cash.
Insurance for Indoor and Outdoor Growers
Whether you grow hemp or marijuana will also affect the type of policy that you get. Now that the federal government is on the cusp of legalizing hemp production, farmers should have access to more insurance options.
Farmers that grow marijuana containing THC, however, will still face many of the same difficulties that have plagued the industry for years. California’s new policy signals a positive change in thinking, but it’s impossible to tell how long it will take for other states to adopt similar regulations.
Regardless, all growers should consider adding crop insurance to their property insurance policies. You can make a lot of money by growing cannabis. An infestation of spider mites or aphids, however, could ruin your crop. Crop insurance protects you from that financial loss.
Policies For Owned and Leased Retail or Dispensary Spaces
The type of insurance policy that you get is even influenced by whether you own or lease your property. If you rent your farm or retail space, then you probably need commercial renter’s insurance that covers destruction of your merchandise. For instance, if a flood destroys the marijuana that you have in stock, then the policy should pay to replace the cannabis.
If you own the property, then you probably need a more comprehensive policy that covers liability, property destruction and damage, office equipment, business records, and the cost of rebuilding structures.
Getting Insurance From a Reliable Source
Since the cannabis industry and the laws surrounding it change so quickly, it’s difficult to say where you should get your commercial insurance. You can do some basic research, though, to make sure you choose a reputable insurance provider.