Tips for Finding the Right Cannabis Business Insurance
It is no secret that the cannabis industry is booming! The United States legal cannabis market is projected to double in size to $41.5 billion by 2025 according to a recent New Frontier Data report. Only four states have no laws relating to legal marijuana use — Idaho, Kansas, Nebraska and South Dakota, according to the National Conference of State Legislatures. In all other states, it is either legalized, decriminalized, allowed for medical use, or allowed for medical use and decriminalized. Here in Michigan, sales are continuing to trend up with record setting sales over $115 million in the last month and expected to surpass $1 billion in sales this year.
It is easy to see why many entrepreneurs, investors, enthusiasts and others are jumping in on the “green rush“. So whether you’re thinking about starting a cannabis business, are a new business venture or a well oiled machine in the cannabis industry – here are a few tips for finding the right business insurance solution!
Partner With an Expert
What should Cannabis companies look for in an insurance provider?
The insurance climate for cannabis businesses remains a bit cloudy however, it is improving. Due to the challenges cannabis operators and related companies face in terms of insurance options, it is vitally important to partner with an expert. Here are a few tips for choosing the right insurance partner for your operations.
- Knowledgeable and Experienced – Your insurance solution provider should have the knowledge and experience in the industry. You know your industry well and understand that each operation is unique. The same can be said for each vertical within the Cannabis industry. The average insurance agent knows very little about Cannabis or the nuances of the industry. Be sure to partner with an agent that does their homework and can be a true resource for the right coverage, important exclusions and limitations, as well regulations facing your business.
- Access to Markets – The cannabis insurance market is very segmented. While many insurance companies remain a hard ‘NO’ to cannabis operations, other companies may provide a policy but the coverage varies drastically. It is important to have access to a broad selection of companies so that you can find a policy that fits your needs and your budget.
- Team – Although many entrepreneurs are independent, it is good to rely on a team of other experts to help along the way. The same can be said with your insurance provider. Your insurance provider should be made up of a team that can assist with the coverage, support, changes, questions, claims, employee benefits, loss control, training and more.
- Tools and Resources – Insurance is only one component in the risk management solution to help finance your risk. It is important to partner with an agent that can provide additional tools and resources to assist with employee training, handbooks, OSHA logs, client portal, and 24/7 access (if possible).
Choose the Right Coverage
What insurance coverages does my Cannabis business need?
Cannabis businesses, much like many other business, need to purchase insurance policies to satisfy regulatory requirements or other parties such as a lender. These policies should also be capable of covering the business against potential threats. Many businesses feel that all insurance policies are the same or that if you pay your premium, all losses should be covered. Unfortunately, that is not the case and when it comes to this industry specifically, the language in each policy can drastically change coverage or determine if coverage will apply at all. Let’s take a look at some of the core coverages a business should be aware of.
- Product Liability – Coverage to protect cannabis businesses from third-party claim related to: product causing illness, bodily injury or property damage caused by misuse, labeling and marketing representations, manufacturing or product defects including faulty or misused equipment.
- An important coverage to consider is product recall insurance. This “withdrawal coverage” may cover the cost associated with removing the defective product from retail to prevent future claims.
- Property Insurance – Coverage for your Building, Contents, Equipment and Tools on premises
- Don’t forget Business Income w/ Extra Expense
- Be sure to include Boiler/Machinery (Equipment Breakdown)
- Crop Insurance – Keep in mind, this coverage is not automatically included in your property coverage.
- General Liability – Coverage for Bodily Injury and/or Property Damage
- Workers Compensation – Coverage for your employees’ medical and lost wages in the event of a workplace injury. It also includes Employer’s Liability coverage.
- Commercial Auto – Coverage to cover the vehicles owned and used in the business.
- Don’t forget to include Hired & Non-Owned Auto Liability
- Excess or Umbrella Liability – Excess Liability limits that can go over and above the Liability, Workers Compensation, and Business Auto limits
- Cyber Liability – Think about the vast amount of information that your business is required by law to collect from customers, employees and third party vendors. That is what makes cannabis businesses a prime target for cyber crime. Read about these specific exposures in our previous blog, What is social engineering and what does it mean for my Cannabis business?
- Crime Insurance – Coverage to protect you against loss due to theft of product, cash or other assets.
- Employment Practices Liability (EPLI) – This provides coverage against many kinds of employee lawsuits including harassment, discrimination, wrongful termination, breach of contract, etc.
- Be sure to look for Third Party EPLI coverage for allegations of wrongful acts made by customers, clients, vendors, and suppliers.
- Employee Benefits – Benefits are key in attracting and retaining the talent you need as your business grows. These solutions can include medical, dental/vision, short-term and long-term disability, life insurance, and more.
- Other important coverage to consider as you grow:
- Directors and Officers Liability
- Surety Bonds
- Cargo Insurance
- Inland Marine (Equipment Floater)
- Kidnap & Ransom
- Special Events
What Else Should Cannabis Businesses Do?
Ask for multiple options to review. Even if the cost is higher, this is part of your fiduciary duty to your organization to ensure all options have been considered. This may seem like a daunting task to take on and you may be left feeling somewhat confused with all of the insurance jargon. When working with a trusted insurance solution provider, be sure to be open and share all details of your business. Often times, clients may be tempted to withhold information in fear of increased premiums or losing coverage. The fact is, these details are very important to ensure that your operations are properly covered.
Not to mention, you also have to operate within a budget for your insurance along with other expenses. For a startup, you don’t have much revenue coming in so some difficult decisions may need to be made. Work with your insurance agent to learn about the coverage and determine if some of the coverage can be added at a later date. It is also important that you ask for clarification of all exclusions and limitations of coverage because each solution is unique.
Our Cannabis insurance solution is designed specifically for dispensaries, cultivators, extractors, manufacturers, transportation, testing facilities and lessors risk buildings. Contact us today to get started!
More Cannabis Industry News
Want to stay up to date on the latest cannabis insurance news? You can find more on important topics in the cannabis industry on our blog.
Or get more information about insurance solutions for the cannabis, CBD, and hemp industries from Spire Insurance Solutions here.
About Spire Insurance Solutions:
Spire Insurance Solutions provides risk management solutions to both the Recreational & Medical Industry. Through a consistent approach, Spire is your expert buyer of insurance and helps companies purchase important Insurance coverages in the evolving Cannabis industry. With years over 45 years in business with experience in assessing risk, our team sees that many cannabis related businesses do not have the coverage they desperately need. Our mission is provide unparalleled and caring service to our clients through our knowledgeable staff and give back to our employees, agency, industry and our communities.
When it comes to insurance, it helps to work with an agency that has both the experience and capabilities to meet your needs. We will help you manage and plan for your potential risks. As professionals, we assess your needs and offer you a variety of insurance products to choose from. Let Spire Insurance Solutions elevate your insurance solution to help your growing business.
Disclaimer: This Blog/Web Site does not provide insurance or legal advice. This site is for educational purposes only as well as to provide you with general information and a general understanding of insurance, not to provide specific legal advice or specific contract advice. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute a client relationship.
The information on this Blog/Web Site is not intended to be a substitute for professional insurance or legal advice. Always seek the advice of a licensed agent in your state pertaining to insurance and legal issues.
Author: Tyler Bartosh
Sources: Property Casualty 360; New Frontier Data; NCSL; InsuranceNewsNew.com
