Step 1: Gather your business information
How do you start with insuring your marijuana business? The first step is to gather your business information. This is an important step when insuring your business. When you reach out to your insurance agent, they are either going to send you an application (preferably an online, interactive application such as ours) or they are going to ask you questions over the phone. To allow for a smooth quoting process, try and have as much business information accessible and ready to discuss. Some items you’ll want to have ready include:
- Business name
- FEIN (Federal Employer Identification Number)
- Mailing address
- Location address(es)
- Last 12 months sales
- Projected upcoming 12 months sales
- Liability limits required by the state, municipality, landlord, etc.
- Property information (if requesting property coverage)
- Crop and/or finished stock limits (if applicable)
- Number of employees
- Annual payroll
This is just the start and the information needed will vary depending on the types of policies you are requesting to quote.
Step 2: Contact an insurance agency that specializes in the marijuana industry
How do you pick an insurance agency for your marijuana business? I mentioned recently in a separate blog post – How to pick an insurance agency for your marijuana business – how important it is to work with an insurance agency that specializes in the marijuana industry. To briefly recap, in the article I mention how imperative it is to have access to the top markets in the state in which you are operating and an insurance agency that is not familiar with the industry is not going to know the best markets to approach. Additionally, if you are working with an agency that is unfamiliar with the right carriers for this industry, they may end up selling you a policy that includes language that is unfriendly to the marijuana industry.
If you aren’t sure of where to start in finding an agency, a good place to start is Google. Google is a great resource for information, including client reviews and access to content. I encourage our clients to check out our website directly to browse through the many pages of content we have available to our clients and prospective clients. You will be able to tell based on Google reviews, social media presence, website content and presentation, whether or not an agency understands the industry.
Also, talk to others in your industry! If you are a secure transporter, reach out to your cultivation and provisioning clients to find out who they are using for their insurance. Same thing for safety compliance labs – pick up the phone and ask your clients who they would recommend to handle their insurance.
Finally, understand that this market is smaller than many other industries, which is why it is important to find an agency that is knowledgeable in the industry and start there. If you are working with an agency that specializes in the industry, there is a very good chance they are already appointed with the top carriers in the industry. Do your research on finding a knowledgeable agency before reaching out and asking for quotes from five different agents!
Step 3: Submit your insurance application
This step works closely with step 2. Many times applications can be completed over the phone with your insurance agent who will then submit the application to their carriers for quoting. If you prefer to complete the application online, make sure the agent received the information and submits to the carrier in a timely fashion.
How important is accuracy on the application? It is VITAL! It is our job as insurance agents to collect the most accurate and truthful answers on insurance applications. If you do not disclose all the answers or information on an insurance application and a policy is issued, the omission could affect the outcome of a filed claim in the future. If the carrier finds the omission of information existed, the insurance company could rescind and cancel the policy as though it never existed.
Therefore, we encourage our clients to review the applications we submit to our carriers for accuracy to make sure they are comfortable with the information being presented to the insurance carrier. Additionally, part of the binding process requires signatures on the original application(s), which should be reviewed carefully prior to signing.
Step 4: Review proposals carefully
Your insurance agent will come back with a proposal(s) typically within 2-5 business days for marijuana businesses. When you have those proposals in hand, it is important to review them in detail! Do not just stop when you see the annual premium. Some agencies will combine step 4 and step 5 together, and that’s okay! We want to emphasize the importance of thoroughly reviewing the application prior to binding.
If you are reviewing proposals prior to meeting with your agent, make a list of questions you’d like answered. This is my favorite part of meeting with prospective clients. I love to hear their questions and concerns when it comes to their business and the risks they see. Each business is different, so this is where insurance gets fun! I want to hear the coverages you don’t understand. I want to hear what risks keep you up at night. This allows me to do what I do best!
Step 5: Meet with your insurance agent to discuss the insurance proposal
We try and meet face to face with all of our clients to discuss their insurance proposals. There is nothing we enjoy more than going and meeting with our clients in their own business environment. Not only is this a great way for us to see what we are insuring, but it’s also a great way to put a face to a name and to really dive in deep to discuss your insurance proposal and address any holes in coverage. In my opinion, the best reviews of proposals happen when I am face to face with my prospective clients and they are fully engaged in discussing possible risks for their business and how we can help mitigate those risks.
Now, we understand that this is not always feasible. We have clients that range from Oregon to North Carolina! It may not always be attainable to meet face to face every time. Thankfully technology has advanced so far in the last couple of years that we now have Skype, GoTo Meetings and more software platforms that we use if we are unable to meet our clients face to face. And at the very least, we can always jump on a call to discuss in detail with our clients. We recommend that our clients set aside some time where you can really focus on the details of the proposal. We know that insurance is not always the most thrilling topic to talk about, but it is important, as a business owner, to understand your coverage.
Step 6: Bind the insurance policy
Once you’ve gone through the insurance policy in detail and determined the best coverage for your own business, you’ll need to bind coverage with your insurance agent and the carrier. How do you bind an insurance policy? Most agents will request the effective date, payment plan and any additional interests on the policy. For marijuana businesses, cities and townships are requesting to be listed on the policy as additional insureds more and more. Because mortgages are not available for marijuana businesses, we typically do not see mortgagees listed, but if your building was purchased utilizing a land contract, the land contract holder will likely request to be listed on your policy.
Step 7: Continuous review of your policy
Congratulations! You’ve taken the necessary steps to insuring your marijuana business. Unfortunately, risk assessment does not stop there. How do you make sure your insurance policy stays up to date? Our clients are put on a continuous review cycle where we are touching base regularly to assess their risk and make sure nothing needs to be updated in their policy. With this industry, the last thing you want to do as a business owner is purchase a policy and forget about it until a claim arises. Revenue and payroll are constantly changing as well as inventory and crops. If you aren’t reviewing on a regular basis with your insurance agent, we highly recommend that you make this a priority.
Now that you are armed with this information, move forward and protect that marijuana business you’ve worked so hard to build!