How is the Price of Liability Insurance and Equipment Coverage Determined?

How is the Price of Liability Insurance and Equipment Coverage Determined?

Price Information for Liability and Property Insurance Quotes

Many cannabis business owners wonder how exactly is their insurance premium calculated by the

insurance company on the quote you may have received.  The quote for insurance has a lot of details leaving many to wonder how was the price calculated.  Some quotes may be vague, while others offer numerous details difficult to understand. 

Cannabis Extraction Equipment

Cannabis Extraction Equipment

In this article we explore two coverage lines–commercial general liability and business property. The former policy covers your business and location for a variety of liability issues from another party.  The latter is about protecting the property or “things” you own. 

The cost of insurance for a dispensary, store, manufacturer, or grow is typically based on a variety of factors. 

  1. What type of insurance policy and coverages are you seeking? 
  2. Are you a store, grow, or edibles company? 
  3. How much revenue or square feet do you occupy? 

How is the price for commercial general liability calculated by the insurance company? 

Depending on the insurance company, the price for this policy may be based on gross revenue or amount of square feet from where you operate.  Certain carriers will calculate the cost of insurance differently for a retail store as opposed to a grow facility.  The reason is based on attempting to measure the amount of risk associated with a particular type of company.  The math behind the calculation is simply revenue times a rating factor for a retail establishment.  Or, square feet times a rating factor. 

Most insurance carriers will offer standard limits of $1,000,000 per occurrence and $2,000,000 per aggregate.  If you’re seeking a additional limits, the insurance company may be able to increase these amounts or recommend an excess policy.

How is the price for equipment determined?

You own a variety of business equipment such as C02 extractors, HVAC, lighting, and computers that needs a quote for insurance.  Depending on the insurance company, the price quote for this policy is the amount of coverage you need times a rating factor. 

For example, a edibles company needs $100,000 of equipment coverage for their butane extraction.  The price is $100,000 times a rating factor used by the insurance company.  Or, you have $1,000,0000 of grow lights, hvac equipment, and equipment for production used with the cannabis plants, the cost is $1,000,0000 times a rating factor.

What other insurance costs should I be aware of on the quote? 

Most insurance carriers will charge fees and include a premium tax. Those fees vary with the insurance carrier and range from $100 to $500.  The premium tax is based on the state the business is located and insurance was purchased. 

Need more information to figure out the cost of insurance? 

We’re here to help with our online tool to calculate the price of insurance for your cannabis business.  The tool is based on if you’re a retail store, dispensary, grow, or manufacturing company.  Please keep in mind this is for informational use only and no underwriting have been conducted by the insurance carrier. 

However, it’s a great tool to get a rough idea on the cost of insurance for these two products.