As an emerging business sector with its own unique set of risks and challenges, insuring a cannabis business may not be easy—but is far from impossible.
The right insurance is one of the crucial parts of running any business, especially if the company is in the cannabis industry. As one of the emerging business sectors with its own unique set of risks and challenges, a cannabis-related business’ insurance can be the difference between success and failure.
The right coverage protects the company, all employees and vendors against all kinds of unfortunate events, including financial loss and responsibility. While it’s not easy to insure a cannabis business, it’s far from impossible. Just follow these steps and you will be on your way to learning everything you need to know:
1) Ask for detailed business information. There are many ways your agency can acquire the needed information. However you do it, here is some of the most important information that should be provided by a potential client:
- Business name
- Federal Employer Identification Number
- Location address
- Mailing address
- Number of employees
- Annual payroll
- 12 months sales projections
- Last 12 months’ sales
- Liability limits
There is specific, more personal data that might be of great help too. For example, you might ask what risks scare your potential clients, or the worst scenario they can imagine for their business. This will help you understand them and their business better.
You can never have too much information about your potential client. The more you know about the business they are running and who they are, the better insurance proposals you will be able to make and the greater the chances that one of them will be accepted.
2) Create insurance proposals for your client. After you finish your detailed research about the business, you can start working on potential proposals. There are several insurance policies available for cannabis businesses, depending on the needs of your client:
- Commercial general liability insurance provides indemnity against non-professional negligent acts.
- Product liability insurance covers potential defective products, such as vaporizers.
- Professional liability insurance protects against mistakes, such as verifying the medical condition of buyers.
- Crop insurance protects crops against certain hazards.
- Cargo insurance protects transported items for or by the business.
- Theft insurance protects against theft and armed robbery.
- Property insurance protects against damage of property, including coverage for natural disasters and fire.
- Employment practices liability insurance protects from potential employee-related claims for harassment, discrimination, failure to promote and wrongful termination.
- Workers compensation insurance coverage for employees who get hurt in the workspace.
- Cyber liability insurance protects against a cybersecurity breach.
- Errors & omissions insurance protects against claims of faulty advice or negligence related to your service.
The right policy depends on the type of cannabis business. For example, for cannabis dispensaries, it’s best if there is a combination of general liability, product liability, workers comp, property insurance, cyber liability and business income coverage. If the insurance policy is for cannabis manufacturers, then it’s recommended to combine general liability, product liability, workers comp, commercial property and business income coverage.
If you are working on an insurance policy for testing laboratories, you should focus on general liability, property and product insurance, business income coverage and E&O. Sometimes the insurance policy can be straightforward. This is suggested for medical cannabis physicians, whose options may only include general liability and E&O.
In short, it all depends on the type of business. There is no one generalized proposal for all cannabis companies, and this should never become a rule.
3) Schedule a meeting to decide on the best option. When the potential client is ready, schedule a meeting to answer any additional questions that they might have. If you visit their offices or workplace, you will be able to take a look at what you are insuring, which might also give you an idea about adding, subtracting or replacing some of the proposed options.
Insuring a cannabis business is often more complicated than insuring businesses in other industries. There are conflicting state and federal laws, contradictory regulations for both cannabis and hemp products, and a lot of other unpredictable obstacles.
For this reason, it’s crucial to build the right insurance policy for your client. This is a challenging task, but if you follow these simple steps, you can succeed.
Bojana Petkovic is project manager, Loud Cloud Health.