When you’re running a cannabis cultivation business you do everything you can to mitigate the risks of your operation, however, there are some risks which are impossible to avoid. Therefore, it couldn’t be more vital for every cannabis grower to have a full understanding of risk management and to engage in it properly in order to protect themselves and their business.
What Is Proper Risk Management?
Risk management - a process of pinpointing the risks faced by your company and then creating a plan by which you intend to survive those risks – is a key element in the success of a business in any industry, but especially in the burgeoning marijuana sector. One primary aspect of any risk management plan must be insurance to cover severe losses which cannot easily be paid for yourself but which, luckily, only happen infrequently.
Insuring Your Grow Operation
There are a number of components involved in insuring your grow operation – you will need coverage for the crops themselves, the structures and buildings on your site, any vehicles or equipment you rely on for the running of your business, liability insurance for the products you are selling as well as cover for any injuries which could potentially be sustained by employees working for your enterprise. While not all of these will be applicable to every cannabis cultivation business, at least some of them will.
Coverage For The Grow Process
There are 3 grow process stages which are able to be insured as part of your coverage. These include:
Coverage of the living plant materials – the clones, seeds and mature plants
Coverage for the harvested plants – the mature cannabis plant material which has already been harvested and which is going through the process of being dried and cured
Coverage for finished stock – mature cannabis plant materials which are fully processed and prepared for sale
Insurance is available for all three stages to cover events such as theft, lightning, fire, hail, explosions, smoke, vandalism, water damage from plumbing or HVAC systems and leakage from an automated fire safety system. Of course, it is important, however, to take on board the conditions that insurers need before they will provide coverage for any grow operation, and prepare well in advance for these promises.
Conditions Of Cover
In order to obtain coverage, your grow facility has to have an inspection carried out by a licensed electrician who will ensure that your electrical system will be sufficient to power all the equipment you use including ventilation systems and lighting. Standard buildings may not be properly equipped for handling the complex and high electrical requirements of cannabis growing, and therefore this inspection tells you whether or not your premises are capable of meeting the electrical requirement for safe operation.
One further condition which must be met is the implementation of a security system which is connected to an external monitoring station. Theft is a primary risk within the marijuana industry and therefore to obtain appropriate cover for this eventuality, a fully functioning security system must be in place. Should your system fail to function, the majority of insurance policies are rendered null and void, so ensuring proper installation and wiring as well as full functioning is vital.
Finally, if you plan to take out insurance cover on your finished stock, a safe is essential of a suitable weight and size to meet the insurer’s requirements. This safe must usually have a TL-15 rating or be a ½ ton model. Before buying any safe, always check the requirements with your chosen insurer in order to verify it is the proper specification and size in order to avoid wasting money. You will also have to install a motion detection system in the room where the safe is kept.
While building a brand new facility makes it easy to incorporate the insurance requirements into the building plan, it is not so easy to do if you have existing premises. However, to mitigate the risks of your grow you will need to make the investment in any remodeling or upgrades necessary to meet your insurer’s requirements or you could find that your hard-earned profits are lost in a single incident with no way of recouping your losses.