10 Types of Medicinal Cannabis Insurance | Reviews
Growing medicinal cannabis can be fraught with unexpected issues. If something goes wrong, the value of your cultivation and production investments could plummet. While all businesses carry risks, cannabis crop businesses are a bit different to most other types. So can you actually purchase insurance for your cannabis or hemp crop? In some areas you can, but often to a limited degree. Regional factors have an impact on the availability of cannabis crop insurance.
Cannabis crop insurance is not always available; and when it is, it’s often limited.
Many claim exclusions tend to apply to cannabis cultivation and medical marijuana pharmaceutical production business, particularly for outdoor crops. But insurance can be pivotal to business sustainability; and for cannabis business operators, insurance is certainly worth exploring — but shop wisely.
Types of cannabis industry insurance reviewed include crop insurance / open-air crop insurance; workcover insurance; public liability insurance and professional liability insurance for Senior Executives and your Board of Directors.
Snapshot: Cannabis insurance isn’t always available; and when it is, it has limitations and ‘claim caps’. But the right type of insurance policy may help protect you, your crops, pharmaceutical cannabis production facilities, extraction laboratories, quality testing facilities— and investors. It’s something you’ll need to factor into your expenditures budget, as it’s also often costly.
Here are some tips as you explore your options. General information only. Not to be taken or construed as advice.
Can cannabis business operators and cultivators get insurance coverage?
The answer depends on where you are, and which companies are underwriting the insurance policies.
(Bookmark this page: Next week’s blog features interviews with some of the top cannabis insurance firms).
As any cannabis startup company knows all too well — or any other growing venture for that matter — it is possible to incur significant losses to your crops, buildings, equipment and/or final product batches. Just ask anyone working in viticulture or horticulture and agricultural farming.
Crop, building and equipment insurance is usually part of a sustainable business plan.
But the cannabis sector is still evolving. Growing high-quality medicinal cannabis means you’ll have a highly valuable crop.
High-value crops typically mean high insurance costs; reimbursement limits (claim caps) and/or claim exclusions.
While one claim saw a California crop grower reimbursed for significant losses of crops due to a large fire; there isn’t otherwise an extensive history of insurance policy insights, nor claim experiences, to refer to when you’re comparing insurance plans or brokers. Also, many policies exclude natural disasters (cyclones, lightning-strike fires, and floods), which are precisely the things most likely to damage your crop (along with insects, other pests or plant diseases).
- As a minimum, many medicinal cannabis cultivators and producers want to ensure they have adequate
- liability insurance
- workplace safety insurance
- equipment and building insurance
- Others seek to cover their crops from unexpected disasters
Getting adequate insurance is challenging, however. That’s because quality medicinal-grade cannabis crops, and industrial hemp, are some of the most highly valued crops per hectare in the world.
- Not all A grade insurance policies will cover the value of large cannabis cultivation operations
- When they do, it’s typically a significant expense against your revenue
Costs for crop insurance can equal 10% or more of the estimated crop value. Exclusions are also likely, such as cyclones and/or floods, which might be at higher risk in your area. Regional variances are to be expected, and custom policies (and price variations) are the norm.
Cannabis business insurance is difficult to attain and expensive. However, if you have the right type of policy by a high-grade insurer, it may help protect investors in the event of a cannabis crop disaster or pharmaceutical production problem.
But not all insurers will cover cannabis crops, processing facilities or extraction processes. Neither are policies equal in what they cover. For example, typically floods are excluded and that’s a potential crop disaster in many areas with adequate annual rainfall.
Business operators and cultivators need to explore a range of insurance policies tailored to their specific businesses and cannabis cultivation, operational or production risks.
- Insurance choices should be carefully made to avoid a lack of coverage where you are likely to need it most.
- Read on to hear FAQs and reviews about cannabis crop insurance plans (including different types of insurance for businesses in the cannabis industry) and what parts of the business they might cover.
Disclaimer: Be advised that this information is general in nature. It is not intended nor construed to be taken as advice and no relationship is assumed between the reader and our organisation. Information is provided only as a general discussion point for individuals and companies exploring medical cannabis cultivation insurance and production business insurance plans, including start-up operations, extraction processes/quality testing laboratories, storage, transportation and exportation.
Who can help you start your medicinal cannabis business?
PharmOut’s cannabis consultants can assist you with licensing applications, medicinal marijuana processing and regulatory requirements for GMP / EU GMP (PIC/S).
Our pharmaceutical facility design architects, cleanroom validation, testing and processing engineers are experts in assisting cultivators and medicinal cannabis manufacturers with environmentally-minded designs for efficiency and GMP compliance. Contact PharmOut with your enquiry or view the medicinal cannabis cultivation support pages.
Types of business insurance policies operators need to consider during start-up, and/or expansion, of a cannabis cultivation/medicinal marijuana production and/or cannabis exportation businesses.
10 Types of Medicinal Cannabis Insurance | Cannabis Industry News
Which of these 10 types of cannabis crop and cannabis business insurance is best for cultivators, pharmaceutical manufacturers, laboratories and export businesses?
- It really depends — nearly every cannabis business has unique complexities, and no two site locations are identical
- Each company should conduct a formal risk assessment and insurance policy review and seek expert advice
- The good news is you now have some choices, even for outdoor crops (open-air); but you’ll need to do your due diligence to find out which policy is best
Several companies now advertise cannabis business insurance, whereas a few years ago insurance policies were difficult to find. We’ll be interviewing several of these insurance providers for our next blog, after the GMP Forum (be sure you’re on our mailing list — send us a request via the contact us link) or review our cannabis industry consultancy, GMP training and design services
Caveats on cannabis crop insurance
- The insurance industry for this sector is relatively new
- Finding online reviews of cannabis business insurance companies are likely going to be limited
As with any insurance, read the fine print. Be sure to understand what you’ll be getting.
- Find out who the underwriter for the policy is before you commit
- More importantly, be sure you fully understand what your policy WON’T cover, in the event of a crop loss, flood, fire, theft, production disaster, or public/professional liability concern
While the insurance sector for cannabis businesses is growing, the fact is that most insurers are reluctant to insure high figure cannabis cultivation operations. That noted, there are policies available…but you’d better factor in the costs, and risks, into your growing budget.
Examples: Many policies incorporate a $1 million to $2 million value cap on claims, or only cover a percentage of crop loss. Why is insurance limited? Because getting insurance cover for the full value of an entire medicinal cannabis crop would be extremely expensive; and not all underwriters are wanting to take the risk.
Cannabis crop insurance costs, figures and policy coverage can vary
Review all cannabis business insurance documents carefully. Seek professional advice from your lawyers, accountants and Board of Directors.
It is usually a good idea to seek professional guidance as you review options for cannabis insurance policies and coverage.
Of course, you need to choose your consultants carefully.
Even with professional advice, the risks of crop loss is difficult to fully assess, as the entire global cannabis industry is relatively new. Plus, weather changes and environmental hazards can be unpredictable.
No insurer is going to put themselves at an unnecessarily high risk of a catastrophic loss. So read your exclusions, and inclusions, very carefully.
Tip: Seek legal and accounting advice from your trusted experts before you purchase insurance for your medicinal cannabis crop and/or pharmaceutical production operation.
Remember, there’s a lot at stake when you enter a cannabis cultivation or production business. Cultivation and pharmaceutical production generally requires large investments, including getting the proper licenses, permits and personnel to manage your crops.
Medicinal-grade cannabis products and industrial hemp crops can also hold high value in particular market environments. They are also at risk of contamination, and/or theft, if GMP (or EU GMP/PIC/S) compliance is slack or has a cleanroom issue or process design flaw.
Getting the right insurance coverage for cannabis crops can be difficult. It is also likely to incur significant cannabis business insurance costs.
You’ll also need to know if your buildings and production facilities are also eligible for coverage, and understand the claim exclusions.
Not all A-grade insurers are willing to underwrite policies for cannabis cultivation operations, open air crops, cleanroom extraction labs and other production facilities.
Even with insurance, there will always be a level or risk (a) if coverage is inadequate for your investments or (b) the loss occurs in relation to an exclusion, such as fire or floods.
These risks are an inherent part of growing very valuable crops. While potentially lucrative, it’s certainly not a risk-free venture.
With that in mind, we will briefly review 10 different types of cannabis business insurance policies operators typically explore as part of their cannabis business planning.
- Insurance is not available across the world and policies can vary from region to region, and country to country.
- Insurance clauses may list restrictions or exclusions that leave cannabis growing businesses with inadequate coverage in the event of certain disasters, such as fires, hurricanes/cyclones or floods.
- Cannabis industry leaders need to take certain risks into account
- Due diligence on insurance plans is strongly recommended
If cannabis crop/cultivation insurance is available in your region or country
Tips: New, industry-specific insurance policies are emerging in the cannabis industry. While some policies may offer good value, be cautious about seeking discount versions of insurance. Make sure your Directors, and/or Investors, buy-in on your policy selection.
- Don’t buy on price — cheap insurance might not be best (similar to other purchases, you sometimes get what you pay for….other times, you don’t)
- Investigate the financial status and history of any insurance providers you are considering purchasing insurance from
And it goes without saying — professional liability is a must for cultivators, manufacturers and exporters.
Review your preferred cannabis insurance companies to ensure they have adequate financial backing in the event of any widespread industry event(s). Check the underwriter’s history and ask experts who’ve been in the growing industry for an extended length of time.
And carefully consider which of these 10 types of cannabis business insurance your business will require.
1) Cannabis Cultivation Insurance including OH&S Coverage
These are policies to cover the crop itself, or closely-related business functions.
What does cultivation insurance actually cover in terms of your cannabis crops?
In general, these insurance plans are intended to protect you from:
- losses related to your plants, subject to claim exclusion clauses
- losses in relation to cultivation equipment or personnel (e.g., workplace liability)
- business income losses during cultivation
Each policy provider will have their own policies, claim caps and prices.
Exclusions always apply. A policy might cover some potential losses, but it also might not cover what you’re wanting it to cover.
Many also have crop insurance claim value limits.
Cultivation Insurance prices (premiums) vary depending on risks, which depend on your growing methods, site location, extreme weather possibilities and other climate risk factors (such as bush fires).
Review crop coverage policy documents thoroughly to assess if the policy will actually help protect your medicinal cannabis business from potential losses, and/or unexpected events or crop disasters.
- Stay observant of policy changes and industry law reforms.
- Recognise that insurance may either not be available in your region or for your specific business function, or may have a cap that doesn’t suit your needs
Insurance Supplier Reviews and Due Diligence
- Keep in mind EU GMP and GMP compliance training and requirements
- Investigate your insurance brokers the same way you would conduct your GMP Vendor Management / Supplier Audits that are required by the TGA, FDA and other regulatory authorities
Read more about GMP Manufacturing Vendor Audit processes.
A cannabis cultivation insurance policy should aim to cover potential crop losses such as crop disasters, but it should also cover employees and contractors and other unexpected losses incurred during cultivation.
Why you need to carefully review your cannabis crop insurance plan.
- Be cautious about who you deem a trusted insurance firm
- Have the policy scrutinized by your accountant and legal teams first
- Also get the plan approved by your Board of Directors, to protect yourself as a key decision-maker (CEO or other Executive) — as there can be a lot of turnover at high levels in the cannabis industry
2) Manufacturing Insurance
Can you get manufacturing insurance for producing medicinal cannabis or hemp product?
Yes, but not all brokers offer this — and due to the risks of production, not all underwriters want to fully ensure your production assets.
Medicinal Cannabis manufacturing insurance policies are intended to protect organisations from losses in cannabis or hemp product manufacturing and production businesses.
What do manufacturing insurance policies cover and how much do they cost?
- Product manufacturing insurance policies vary in terms of cost and coverage
- They predominantly tend to cover physical losses from medicinal cannabis production and/or hemp production (e.g., physical losses during the pharmaceutical processing, extraction and testing phrase)
- Some of these plans will include, or combine, professional liability and general liability with manufacturing policies
- Otherwise, liability policies need to be purchased separately to cultivation or production equipment insurance
Review the details from an A-grade insurance provider.
3) Building Insurance | Cannabis Industry Facility Policy Coverage
Building insurance may sometimes be included in your manufacturing or production policy.
However, you may require coverage under a separate insurance policy for structures and facilities.
- Building insurance may be purchased and listed under a separate insurance policy
- Designed to cover your cannabis production facilities (property insurance/structures and equipment)
CAUTION: Cannabis is still classified as a poison, and production uses various reactive chemicals, laboratory equipment and pesticides. Not all insurance firms will want to take the risks.
It’s best to check on insurance availability — and review the policy inclusion or exclusion criteria — before you design, engineer or purchase your greenhouses, equipment, clean rooms, drying and extraction facilities and other pharmaceutical production buildings (cannabis business infrastructure). Otherwise you could find you’ve invested millions with no insurance backing.
That noted, sometimes the region you’re growing in won’t be one that insurers are willing to cover, but it might have ideal growing climate or affordable labour and transportation costs.
4) Cannabis Delivery & Transport Insurance against theft or product diversion
One of the biggest concerns with medicinal cannabis transportation is the risk of theft or product diversion.
The further along your cannabinoid products are towards completion and distribution, the higher your security risks (theft or diversion).
- Distribution is a particularly risky time for your products in terms of
- cannabis theft risks
- potential diversion/swapping out of your medicines with fake pharmaceuticals
- substandard products (resulting in a recall or not being able to sell your cannabis as A-grade/pharmaceutical quality, if something goes wrong)
- Security and monitoring and record-keeping is mandatory (blockchain technology can also help prevent theft or product substitution )
Insurance policies tend to require strict security measures to be built into all of your designs, including cultivation areas, drying area, extraction labs, manufacturing processing plants and procedures and storage and transportation infrastructure.
5) Insurance Policy reviews for Cannabis Extraction Lab Facilities
Pharmaceutical Cannabis Laboratory Insurance
Medicinal Cannabis products must undergo stringent quality assurance testing and validation across the lifecycle. GMP must be complied with at every stage of production and distribution, for safety and quality reasons.
This helps ensure a quality product that meets TGA, FDA / EU GMP standards.
- If you have a medicinal cannabis production business, you’ll know that compliance with GMP (EU GMP) is crucial to your ability to safely export the products, as well as reduce crop wastage and product wastage that might occur if you failed a regulatory audit or found a contaminated product batch.
- With increased intervention on testing marijuana products, it is becoming increasingly more important to insure against liability and professional liability.
6) Pharmaceutical Product Liability Insurance
Product Liability insurance is a must-have for pharmaceutical product manufacturers of all kinds, including medicinal cannabis.
- Product liability insurance is necessary to provide coverage against the risk of someone being injured from using your project
- This includes potential physical, social or emotional injuries, disabilities or other serious harms and/or deaths
- Liability risks for pharmaceuticals also include property damage arising out of someone using your product if the product is substandard, defective or contaminated or even improperly labelled
- e.g., if someone has an accident and your product failed labelling standards, you could find yourself in some serious trouble with the FDA or TGA or other regulatory body
- criminal charges or jail terms might even apply for negligence or faulty labelling, or substandard products knowingly released, or if the product led to other harms
Example: Faulty packaging is not child-proof and a child consumes your product; or the product is mislabelled and someone takes an overdose or mixes it with a medication that creates an adverse-drug reaction.
7) Professional Liability Insurance
Professional liability insurance for Cannabis Entrepreneurs, Growers and other Industry Professionals
Independent Professional liability insurance is strongly recommended for cannabis entrepreneurs and other professionals in the medicinal cannabis industry.
We mentioned that some of the earlier policies may also cover professional liability insurance. Yet this is typically a separate insurance policy that most cannabis entrepreneurs, cultivators and business managers should have in their insurance policy holdings.
Suggestions by experts in the cannabis industry include:
- This is one of many must-have insurance policies
- Review the liability policies carefully; make an informed and educated decision
Assess which senior managers, operators and Board Members need to have this insurance in their policy holdings (likely all of them, but ask a top cannabis insurance broker).
Additionally, the industry has high personnel movement and turn over. So if you’re in a senior role, you need to protect yourself, and everyone should investigate adequate liability coverage / minimum vs maximum liability claim amounts.
These policies are aimed at protecting cannabis industry professionals who could end up making a mistake that incurs liability for the harm of another person or property.
8) Product-specific insurance policies
- Some insurers have special plans targeted to specific types of cultivation or production (e.g. specific plans for hemp production, GMP or EU GMP medicinal cannabis, extraction, TCH-rich medicines, and more)
- There are also various policies for different stages or focuses of cannabis business operations
- Examples: a specific crop protection policy for growers, a different type of insurance policy for extractors, wholesalers, distributors, transportation and security firms and dispensaries/distributors.
9) Cannabis Dispensary | Risks and Insurance
- If you are opening a dispensary for recreational cannabis distribution to consumers (such as you are able to in certain regions of the USA and/or in Canada), you may require Dispensary Insurance.
- Dispensary insurance policies are designed to protect your cannabis inventory (stock) and other property (facilities and equipment) or personnel for any liability (or loss of income) in the event of a loss or workplace incident.
10) Environmental Damage Insurance
Insurance to cover environmental damage claims is typically not included in normal cultivation insurance policies (nor is it part of traditional agricultural or farming policies). But the world is changing….and environmental claims, and/or negative brand publicity, loom large.
- With digital tribes now carefully monitoring pollution and other manufacturing byproducts (waste, air quality concerns and more), you need to explore coverage
- in the event your cultivation or production process and/or
- your transportation/exportation business and/or
- waste management systems, recalled medicines, and/or contaminated crops
- ends up harming the environment
This lack of coverage has left farmers and others who use land, air, water, soil and/or animals to grow crops, open to claims in terms of the impact their crops, or processing facilities, are having on the environment.
- Although not historically included in most farming or cultivation insurance policies, it is highly possible claims could arise to growers in relation to the impact of cannabis cultivation operations and/or processing activities in terms of environmental damages or harms, such as water pollution or soil contamination or improper waste disposal.
For more articles about the medicinal cannabis industry, click here.
Insurers Remain Cautious About Marijuana Insurance Market
Read TOP 5 TIPS for cultivation cannabis – facility designs
Contact us for consultancy for medicinal cannabis businesses around the world.
Page last updated July 31, 2019.