As part of our Grow Sessions podcast, we had the opportunity to speak with Michael DeNault, Cannabis Practice Executive at World Insurance. Michael shared valuable insights into how insurers assess the risks associated with cannabis facilities, taking into account infrastructure, technology, and operations.
Cannabis insurance doesn't look anything like traditional crop insurance, but what was the most eye-opening aspect of our conversation? By opting for TSRgrow’s advanced LED lighting solutions with remote power technology with proactive alerts, cannabis cultivators can reduce their annual insurance premiums by as much as 50 percent—a significant savings for growers looking to optimize both safety and cost-efficiency.
The following is a general breakdown of how cannabis insurance works, with specific considerations for cannabis cultivators, including more details on why your choice of lighting can help you reduce annual costs.
The Fundamentals of Cannabis Insurance
Insurance requirements vary from state to state, but in most jurisdictions, there are three core elements within a complete insurance portfolio for a cannabis cultivator:
General Liability & Product Liability Insurance
This is a fundamental policy for most cannabis businesses, covering third-party claims for bodily injury caused on-site or by the products ingested, reputational harm, and if you lease, damage to the premises rented to you.
Crop Insurance
Specifically designed for cannabis cultivators, this policy covers plants throughout the growth cycle, from seed to shipment, against risks like fire, theft, natural disasters, and other events that can impact the ability to harvest.
Commercial Property Insurance
It protects buildings, equipment, inventory, and other physical assets from events such as fire, theft, and vandalism.
Insurance Coverage: What’s Within the Scope?
As anyone in cannabis knows, this industry never operates as easily or as smoothly as other (non-regulated) industries. Crop insurance, in particular, looks much different than it does with conventional crops, like greenhouse-grown cucumbers or fields of corn.
For example, most outdoor cannabis operations aren't covered by traditional crop insurance. Another example: pest infestation. A tomato grower will be covered if their yield is hit by an infestation, whereas this doesn't necessarily apply to cannabis or hemp facilities. Instead, it generally covers losses caused by:
- Natural disasters
- Fire and smoke damage
- Theft and vandalism
- Water damage from plumbing or fire safety systems
- Equipment malfunctions
Cannabis Insurance Costs: What Can You Expect?
In the cannabis industry, insurance is mandated by local regulations, which means coverage and costs can vary substantially from one market to another.
But, insurers generally look at the following during the initial liabilities and cost assessment to determine annual rates:
- Number of harvests per year
- Annual yield
- Average wholesale value of the plants
- Location of the cultivation operation
- Grow room technology, including type of lighting
- Risk management practices
Like other aspects of working in a highly regulated industry, cannabis insurance premiums are higher than elsewhere due to perceived high risk and lack of historical data. (The insurance industry is heavily reliant on historical data to complete risk assessments and cost calculations.)
Yet, according to Michael, insurance rates are coming down. He discussed the example of a small cultivator operator in Massachusetts, who is now paying around $1,000 per year in general liability and around $2,500 per year in product liability. Other sources cite crop insurance ranging between $700 and $8,000 in annual costs.
Important Considerations for Cannabis Insurance
Clearly, the more canopy under production and the higher the value of the plants on the market, the greater the insurance costs. However, many growers don't realize that lighting and other grow room technologies also substantially impact the annual costs.
This is particularly the case when it comes to lighting. The choice between an LED and a traditional HPS fixture isn't just playing into energy costs and overall facility efficiencies, Michael explained; it also increases the risk of loss.
This is because traditional HPS lights can get very hot, up to 500 to 1000 degrees Fahrenheit. So much heat in a confined, humid environment has already caused cultivation facility fires, all of which means traditional lighting is a higher risk for insurance carriers to take on.
Facilities with LED horticulture lighting with integrated monitoring and controls see this preference reflected in their premiums. Switching from HPS to TSRgrow advanced LED lighting with remote power and integrated monitoring and control puts the cultivator in optimal control to mitigate risks and can save up to 50% in the commercial property insurance of the policy.
Another consideration is the location of the fixture drivers. Traditionally, LED grow lights have the power attached to the fixture themselves. This not only adds heat to the grow room but also risks the canopy living underneath.
Michael told the story of a cultivator whose ballasts were located inside the grow room using traditional LED lighting. When there was a power surge, 25 percent of the fixtures caught fire, leading to a 90 percent crop loss. By placing the ballasts outside the grow room, as TSRgrow does with their advanced lighting technology, this risk is reduced.
Again, this plays into the insurance calculations. Time and time again, the data shows that LED lights are much safer than traditional HID lights, translating into significant cost savings on insurance premiums.
TSRgrow Advanced LED Lighting Solutions: Better for Plants, Better for Insurance
Our advanced grow room solutions offer cultivators a clear path to savings. First, Advanced LED Lighting Solutions significantly lower the risk of fire hazards and heat damage. Remote Power Servers help facilities move power sources outside grow rooms, mitigating the risk of electrical failures and crop loss. Most importantly, GROWHub is an integrated data monitoring, alarm/alert, reporting solution that is in the remote power offering proactive response to any abnormality and eliminating crop fatigue or loss.
Together, these advanced technologies help cultivators boost yields and grow smarter—all while reducing operational overhead costs, including insurance rates. Get in touch with the TSRgrow team today to find out more.
