Insurance For Cannabis, Hemp, and CBD Processing & Manufacturing

The number of companies manufacturing hemp/cannabis derivatives like Cannabidiol (CBD) has increased significantly since the legalization of this non-psychoactive substance. In 2019, CBD has classified as an agricultural product and unlisted from illegal drugs in the United States. Regardless of this development, cannabis and CBD are still regulated by laws in the United States and across Europe. That said, with the changing regulations and new products entering the market, the manufacturing industry needs to be careful, and prepare their business for the unforeseeable.

Cannabis or Hemp processing can range from an extract containing only a pure, isolated cannabinoid like CBD, to an extract containing more than 100 cannabinoids and terpenes. In the natural leafy stage, cannabis is psychoactive and can intoxicate a consumer. However, when it undergoes processing, the non-intoxicating CBD is extracted.  Regardless of the end product, cannabis and hemp processing takes a series of steps. After cultivation and harvesting the processing steps are as follows:

‍

• Drying & Storage: Hemp leaves are dried and stored. The next line of action in the processing and manufacturing stage is turning the leaves into a powdery substance. This is carried out in a standard facility with a miller and equipment for storage.
• Extracting and Separating: The extraction stage involves the removal of high-grade hemp oil from powdered hemp or cannabis leaf. The separation technique removes unwanted chemical compounds and keeps the quality of the extracted hemp oil. This process takes a couple of ways; CO2 heat & pressure technique, the addition of Ethanol, or the use of olive oil.
• Distilling: Distillation, an integral part of processing, is used to achieve a consistent result despite the variation of hemp or cannabis plants used. It helps to get a uniform texture and taste. At this stage, different flavors can be generated.  
• Isolating: The isolation of Tetrahydrocannabinol (THC) from the extraction is important before the derived content is regarded as safe and non-psychoactive. Tetrahydrocannabinol is the main psychoactive compound in cannabis that causes a high feeling of intoxication. When processing CBD, the THC is thoroughly removed to get a pure and non-psychoactive product.

‍

Claims or losses in the processing and manufacturing of cannabis could result from several aspects of the business.  A facility where cannabis is processed requires employees, equipment, and buildings, often with risky factors such as gas, liquids, and electricity. Losses may result from employee claims of bodily injury through the use of equipment, machine malfunction, and damage to the buildings. Violating the production regulations & standards is another possible situation that may lead to losses for a company manufacturing cannabis, hemp, or CBD.

Your insurance advisor will assess your operation and make recommendations based on the people, property, and activities. Insurance is certainly not a one-size-fits-all type of thing, so insurance plans may change depending on the situation. The most common types of insurance for a cannabis, hemp, or CBD manufacturer are the following:

• General Liability & Product Liability: This covers every form of bodily injury to non-employees in a facility and third parties like your customers outside the facility. It will cater to the cost of treatment, defense, and settlement depending on the nature of the claim. General liability is not sufficient to run a manufacturing facility.
• Commercial Property: This covers the cost of repairing or replacement of damaged equipment and repairing damaged edifices. Things like your hydrocarbon, ethanol, distillation machines, and extraction rooms.
• Employee Practice Liability and Employee Compensation: This takes care of claims in the lines of employee harassment, workplace discrimination, wrongful job termination, and other types of claims. Employee compensation is often used when an employee gets injured. The policy pays for the medical expenses of an injured employee or contractor.
• Crop Insurance: This is just as important in the processing stage as in the cultivation stage. During the cannabis manufacturing process, the finished product is still stored before further production. The stored cannabis or hemp can be stolen or may get damaged. To mitigate this sort of loss, crop insurance is required. to protect the value of your finished product.
• Directors & Officers: It's not uncommon for businesses to have a board of directors. A cannabis or hemp manufacturing company with directors that make the decisions that affect operations needs to acquire the D&O policy to protect individuals that make up the board. Their assets will be shielded from any form of claim or lawsuit against the business.

To get an accurate cost of a premium, an insurer will have to assess the manufacturer's operations. The size of the operations, type of products, and a couple of other factors often influence the cost of insurance for a cannabis or hemp manufacturing company. Some of these factors are:

• The Extent of the Operations: If a company only processes and manufactures hemp or cannabis it will most likely pay less premium compared to another that adds selling wholesale or even retail to its services. This means the bigger the operation the higher the cost of the premium.
• Projected Sales or Actual Annual Sales: For a company just starting, a projected annual sale can be a deciding factor while the sales history of an established company will decide the premium cost.
• Property Value: The replacement value of the equipment in a facility instant amounts to the cost of the premium. The higher the replacement value the costlier the premium.
• Employee Size: The higher the number of employees in a facility the more chances of injury cases and employment-related claims.
• Risk Management: Excellent risk management systems reduce premium costs. A company that puts safeguards in place to minimize bodily injury will enjoy favorable terms or reduced costs. At times, an insurance company may even close its doors to companies with too much risk.

‍

To estimate, a premium for a new hemp company may cost about $5,000 a year. At this price, General Liability, Product Liability, Workers Compensation, and some policies will be included in the plan. However, to get an accurate price, call, text,  or send us an email to discuss with Fullsteam Cannabis Advisor. Our trained and experienced agents understand the processes of the cannabis & hemp industry. We'll give you just the insurance advice you need!

‍

The process to get insurance is an easy and straightforward process. You get us the information we need to engage insurance providers and we'll supply the best possible quote(s). We're also real people that probably live in your city, and we value relationships, so meeting in person is always an option. At the end of the day, our job as brokers and advisors is to educate you on what everything means. It also helps us to understand your business and insurance needs, so we can get underwriter comfortable with quoting. We'll help you understand insurance and risk management practices, and be there for you as the business grows.

‍

Some traditional businesses can move through the process faster as a lot of underwriting is supported by artificial intelligence, but most policies today will be reviewed by an actual person. We have decades of experience working with the underwriters at each insurance company, and pitch your business to each of them. We work with and for you.

‍

The standard process to produce quotes for your business is as follows:

‍

1. Advisor Introduction: this can be a quick phone call, email, video conference or in person meeting. You'll decide if you enjoy the advisor and trust their advice. This is also where you'll be able to ask questions, provide information about your operation, and go over the process to get insured.
2. Data Collection & Underwriting: this is where you'll get into the fine details about underwriting questions and information that will be necessary to engage the insurance market. You'll be able to chose from filling out PDF's, going through our smart-form technology, or provide it all over the phone, email, or in person.
3. Quote Proposal & Review: once your advisor has the information needed for underwriting, they will work with the insurance market to produce quotes. This can take a day or up to a week, depending on the time and operation.
4. Finalize Coverage: here you'll decide the coverage to move forward with. Final steps include signed documents, payment, and selecting a specific start date.

‍

ADIVSOR TIP: Be prepared to spend 5-10 minutes with your advisor to break the ice and get the ball rolling. Once aligned, your advisor will create clear next steps and create a timeline for quotes. If your business is new, and has unique risks, then you should expect a little back and forth.

‍

Get in touch with your advisor, or send over the details digitally today.