If you’re building a business based on cannabis production, distribution or sales, cannabis property insurance is essential. Any small business needs property insurance, but a cannabis business has additional considerations, from inventory to equipment and business interruption. Read on to understand how to protect the assets of your cannabis business.
Understanding Cannabis Property Insurance
Cannabis property insurance combines commercial real estate insurance with other types of business insurance like inventory protection or crop insurance. Cannabis insurance can also be a type of small-business insurance policy customized to address the risks specific to the cannabis industry and the type of business. Your cannabis business insurance will typically cover property damage resulting from accidents or natural disasters, crop failure, theft, equipment damage and workplace injuries.
What Does Property Insurance for Cannabis Businesses Cover?
Insurance for cannabis businesses can be customized to fit the business. For example, a dispensary might require different coverage than a testing lab or grower. Below is an overview of the main types of insurance a cannabis business will need.
Property Damage Coverage
Commercial property insurance can help your business recover financially in the case of fires, theft, vandalism and other damage or loss to the business premises or property. This type of coverage is a commercial property insurance plan that typically covers physical structures but does not cover the building contents. For that, you’ll also need inventory protection.
Inventory Protection
Inventory protection insurance covers your physical cannabis inventory and any other products marketed by your business. This coverage protects your company in case of theft, vandalism or other damage. It is a way to ensure your company is protected even if the worst happens. Generally, inventory protection only applies to finished products and equipment stored in inventory. If you need coverage for a crop, you’ll need to get crop insurance.
Equipment and Machinery Coverage
Cannabis equipment coverage is a type of insurance you can get to protect the machinery and tools used at your cannabis cultivation facility or for cannabis production. This may also include heavy equipment or trucks used to transport the cannabis, although that may be covered by commercial auto insurance. Equipment and machinery coverage will cover the cost to repair or replace equipment damaged because of fire, theft, vandalism, natural disasters or equipment that simply breaks down.
Business Interruption Coverage
Business interruption or income coverage can help you offset lost income if your business is forced to close temporarily. Usually, this type of insurance will list covered perils and will only pay if the reason for closure is a covered peril. For example, it might cover business interruption resulting from property damage, equipment damage, inventory damage, natural disasters such as hurricanes or other specific situations.
Other Types of Insurance Coverage to Consider
In addition to property insurance, you should also consider the following if you’re a cannabis business property owner or tenant.
General Liability
General liability, or commercial general liability (CGL) insurance, protects a business’s products and property from liabilities. It should cover your cannabis business for issues arising from bodily injury, personal injury and property damage. Damage from a business’s operations or products or injuries that happen on the business’s premises are usually covered under general liability insurance. Average costs are just $42 per month for small businesses.
Workers’ Compensation
Workers’ compensation insurance is required in 49 out of the 50 states. Unless your business operates exclusively in Texas, you’ll be legally required to carry this insurance if you have employees. Workers’ compensation insurance provides cash benefits or medical care for workers injured or who become ill because of their jobs. Workers’ compensation insurance costs an average of $45 per month.
Professional Liability Insurance
Professional liability insurance, also called errors and omissions insurance, protects you from liability in case of professional mistakes. Physicians prescribing cannabis, dispensaries, distributors, testing labs and growers can all benefit from professional liability insurance. Average costs are $61 per month, but that varies by business type and activities, coverage limit and terms.
Commercial Auto Insurance
Commercial auto insurance covers your business vehicles and may include any heavy vehicles or farm equipment owned or operated by your cannabis business. It is designed to protect your company in case of potential loss from vehicle damage, theft or liability while employees drive the vehicles. Commercial auto insurance averages $147 per month. However, this can vary widely based on the number of vehicles, their make, model, age and condition.
Surety Bonds
Surety bonds are a type of insurance that guarantees your cannabis business will fulfill the terms of its contracts and pay its suppliers. Many states require cannabis businesses to get surety bonds as part of licensing. You can check your state requirements and compare costs to decide whether they make sense for your cannabis business.
How Much Does Property Insurance Cost?
According to Insureon, small businesses pay an average commercial property insurance premium of $67 per month or about $800 per year. Its data suggests that 62% of customers spend $100 or less for coverage. Your property insurance costs will vary based on the type of coverage, specific plan, property size, inventory volume and specific business risks.
How to Apply for Property Insurance
If you already have business insurance, you can contact your insurer to inquire about additional insurance needs. If not, the step-by-step process of applying for property insurance is simple:
- Research: Research property insurance for your cannabis insurance online. Many sites will let you compare rates for your property before contacting the lender directly. Or, start by looking at the best cannabis insurance companies here.
- Apply: You can apply for insurance by filling out a form with information about your business, registration, proof of your ownership, number of employees, estimated business revenue and contact information. You can also work with an insurance agent.
- Compare: It’s a good idea to apply to multiple property insurance agencies and then compare final offers with total costs, fees and coverage amount minus any deductibles.
- Finalize your choice: Double-check offers, coverage amount, exclusions and total costs before deciding on the best plan.
- Choose an offer and sign: The final step is to sign the paperwork and make the first payment.
Compare the Best Cannabis Property Insurance from Benzinga’s Top Providers
Find the best cannabis property insurance offers from Benzinga’s top providers this year. These trusted insurers can offer you competitive rates, excellent customer service and good coverage to protect your business.
Do You Need Cannabis Property Insurance
Cannabis business property insurance is essential to protect your assets and your company. You have a variety of insurance options to choose from to protect your company, from general liability insurance and professional liability to surety bonds. While insurance premiums for a cannabis business may be higher than some other businesses, the costs depend on the specific nature of the business, size and location. Getting customized quotes and comparing offers will ensure you get the coverage you need for the best available rates. If you need more options, check out the best business insurance here.
Frequently Asked Questions
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Yes, you need property insurance if you own or operate a cannabis business. Property insurance will protect your asset value in case the worst happens.
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Yes, many insurers will let you bundle cannabis property insurance with crop insurance, general liability insurance, workers’ compensation or other types of insurance. Speak to several insurers to understand the types of insurance they offer and the possible savings from a bundled offer.
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Generally, business insurance premiums are tax deductible. The Internal Revenue Service often views insurance premiums as a cost of doing business and may accept them as tax deductions. However, under Section 280E of the tax code, you cannot deduct expenses from gross income associated with “trafficking.” In some cases, this is applied to cannabis businesses. You can find a guide to business deductions, and consider speaking with a certified public accountant to clarify your business situation.
