Impact of Coinsurance on your Business Property and Cannabis Coverage

Every cannabis business goes through the process of trying to determine the proper amount of property insurance and understanding key policy terms.  One of those terms is named coinsurance.  Basically, it's a calculation used by insurance carriers to determine the amount of a loss paid after a claim for business personal property coverages.  Property means building, cannabis,  grow equipment, computers, display cases, tenant improvements, or other property owned by the cannabis company.  Commercial liability policies will not have coinsurance.

Coinsurance is always expressed as a percentage.  For example, a cannabis licensee may insure their grow equipment for $500,000 with an 80% coinsurance factor.  A retail marijuana store might insure the building for $350,000 and cannabis stock for $100,000.  Other coinsurance factors may include 90% or 100% as insurance policies will have one coinsurance factor.

For this reason, a online tool is available to the cannabis industry to help figure out the impact of coinsurance for determining their property values.   You basically need to know the following:

  1. The value of the property
  2. The coinsurance factor
  3. The value of the property to be insured
  4. Deductible 
  5. Potential claim amount

The consequence of not being insured to the actual value of the property can result in a reduced claim settlement.  One reason, the online tool can be used to determine if the coinsurance factor is likely to be an issue by manipulating different numbers. 

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