Crop Insurance for Cannabis Cultivators & Growers

Of the many kinds of insurance policies within the cannabis space, crop insurance is perhaps less known than more extensive policies like property and general liability. Yet, whether or not a growing facility is insured can have a massive ripple effect across the rest of the cannabis industry. It’s time to talk about crop insurance for cannabis.

What Is Crop Insurance for Cannabis Cultivators?

Crop insurance is a safety net for cultivators to handle unexpected crop loss and retain financial stability in business. Crop loss insurance is triggered by a loss due to natural disasters, inclement weather, disease, or pests. Whether a flood ruins your field, a wildfire takes down your greenhouse, or a power outage allows temperatures to spike in your indoor grow, crop insurance may be able to help.

Crop insurance is a critical piece of the agriculture industry and something even the federal government provides for many farmers. However, the stigma of cannabis still gets in the way of some cultivators seeking crop insurance, and not every cultivator qualifies for coverage.

Who Does Crop Insurance Protect?

Crop insurance is most readily available for indoor and greenhouse cannabis cultivators. Unfortunately, outdoor growers often face stigma and policy denial based on outdated perceptions of cannabis or a biased view of the potential risks of outdoor growing. Insurance can and does evolve, and this may change as the cannabis industry continues to grow.

Crop insurance on marijuana fields is an essential shield for indoor and greenhouse cultivators, offering protection against the numerous risks and fluctuations inherent in cultivation. With this crucial safety net, you can fortify your business’s resilience and ensure its long-term profitability.

The regulations governing cannabis vary at the local, state, and federal levels, so crop insurance may not be mandatory for cultivators in your state. But just because it isn’t a legal necessity doesn’t mean it’s not helpful. Crop insurance provides a safety net and a semblance of stability for cultivators operating in an unstable marketplace. The rest of the market feels the ripple effect when cultivators are stable. And when cultivators are unstable, prices fluctuate, and the rest of the industry suffers.

What Does Crop Insurance Cover?

Crop insurance offers broad protection to cannabis plants prior to harvest, including:

• Losses from weather events such as wind, hail, and fire
• Losses due to plant diseases and pests
• Damage or destruction due to vandalism or theft

Crop Insurance Claim Examples

When does crop insurance become applicable? Here are a few examples.

1. Weather Damage: An unexpected hailstorm damages a cannabis grower’s outdoor crop, reducing their harvest and cutting into profit. Their crop insurance covered the loss, allowing them to recoup the costs and replant the following season.
2. Disease Outbreak: A fungus outbreak damages plants and causes significant crop loss for a cannabis farm. Their insurance policy compensates for the damaged plants, helping them recoup the costs and recover for the next growing season.
3. Theft: A gang of intruders broke into a cultivation facility and stole the mature plants, leaving the cultivator with a gap in plant harvests. The grower’s crop insurance covered the loss, helping to stabilize their financial situation and allowing them to bridge the gap before the next round of plants matures.
4. Fire Damage: A cannabis farm is destroyed by a raging wildfire, taking down the crops as well as the existing farm infrastructure. With the payout from crop insurance, the farmer can rebuild his farm and replant his crop for the following year.

How Much Does Crop Insurance Cost?

The cost of crop insurance is based on several factors and can change based on these. As with all insurance policies, the number that most concerns you as a business owner is your policy premium or the amount you pay monthly, quarterly, bi-annual, or annual to retain coverage.

Premiums are calculated based on the size of a cultivator’s grow space, the types of crops grown, and farm location, to name a few. But crop insurance costs are also impacted by factors outside of the cultivator’s control, such as the current state of the insurance industry, economic factors such as instability and inflation, weather conditions, and storm destruction. Insurance costs will increase if claims have gone up in the past year.

How Does Crop Insurance Benefit the Cannabis Industry?

Crop insurance provides vital financial protection for cultivators against the many risks of agriculture. This policy provides a safety net against different kinds of crop loss, whether due to extreme weather, a pest infestation, or the spread of disease.

But it’s not just cultivators who benefit from crop insurance policies, though they are the most direct beneficiary. Cultivators are the backbone of the cannabis industry; without cannabis flower, there is nothing to process, package, sell, or consume. Stability for cultivators has a ripple effect throughout the industry — when cultivators have stability, they can expand and contribute to the growth of the entire industry. Conversely, the whole industry feels instability when cultivators face crop and financial instability.

Crop insurance is not the only action cultivators can take to become more stable; insurance is just one piece of a robust risk management plan. While risk management plans can feel overwhelming, following our five-step framework takes the guesswork out of risk management and helps cultivators generate a plan to understand, assess, and address the risks from all sides.

If your cultivation business still needs a risk management plan, now is the perfect time to create one. By evaluating your risks from all angles, you can identify exposures in your business and take the appropriate actions to safeguard yourself, from following best practices to creating a comprehensive insurance umbrella.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.