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Insurance protection needed up and down supply chain

From seed through to sale, operators in the cannabis supply chain have specific risks and coverage needs. We’ll be looking each week at top risks, available coverages, and gaps to look for when handling cannabis-related accounts for your clients. This week, we take a closeup look at cannabis crop insurance.

Two of the most critical coverages for cannabis cultivators are Goods in Process (covering damage to growing crops) and Finished Stock (this covers crops still in an insured’s possession such as harvested, budded, cultivated and ready to move to the next phase of production.) While many carriers exclude these coverages, agents need to note that these coverages are often sub-limited. 

Cannabis crop insurance

Typically, the exposure for hemp crops has proven to be the most challenging insurance coverage to place within the cannabis and hemp/CBD space. Carriers offering this coverage are scarce. Novita’s Medical & Recreational Cannabis Program is one of the very few options in the marketplace for cannabis crop insurance  – including seeds, seedlings, clones, vegetative and flowering plants – harvesting plants, and finishing stock.. The availability of outdoor cannabis crop insurance is novel due to the many variables impacting outdoor crops in general such as damage or losses from weather – including heat waves, dry spells and droughts, hail, wind, wildfires, flooding, slides, and the like – compounded by theft potential. 

To accurately determine the limits needed, outdoor crop valuation is an important step requiring a detailed understanding of crops being grown, including yield per acre, the total number of acres, and the growth phase used to calculate a value. Growth stages such as seedlings, vegetative, flowering, and harvested can can often be insured in coverage “layers.” For example, the number of flowering plants on the property is multiplied by the wholesale market value and that equals total plant value; i.e., 1,000 flowering plants valued wholesale at $500 per plant, insurance coverage amount would be $500,000. Each growth stage is valued to determine coverage amounts. 

Knowing the plant materials’ wholesale value fluctuates and differs at each stage, a cannabis grower should work closely with their insurance agent to ensure their limits sufficiently protect them from a loss when putting together a policy for cannabis crop insurance.

Of course, there are likely coverage limitations, such as how much the insurance carrier is ultimately willing to cover, and underwriting requirements focusing on living plants’ security, water availability to battle a blaze, and clearing brush around the property. Many of these requirements are indeed similar to requirements for insuring any property – particularly in the western US – and are reasonable precautions every outdoor cannabis farmer should be incorporating, even if insurance wasn’t involved.

Next week, an up-close look at indoor cultivation.

Need assistance to get your Cannabis clients covered? Novita Insurance Solutions is here to help; check out our program overview here and contact us for more information about cannabis crop insurance.

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