As with any other major industry, access to quality insurance coverage is of the utmost importance for Cannabis companies. Most big-name insurance carriers, however, won’t come near the Cannabis industry due to the plant’s classification as a Schedule 1 drug, which also makes it federally illegal. With so many vertical moving parts, Cannabis companies need insurance for equipment, employee benefits, E&O, and various other aspects of their operations.
There are, however, plenty of insurance companies that will write policies for Cannabis businesses, and it appears that there isn’t a whole lot that they won’t cover (for a price, of course).
The first step in getting the coverage that companies need is finding an insurance agent that is knowledgeable in the Cannabis industry’s needs and requirements, and having them tailor a policy package that suits your business’ vertical structure. By consulting with an experienced agent, the Cannabis company will be given the proper information to obtain the proper policies, and the peace-of-mind that their operations and assets will be covered and safe.
Sorting out the different coverage options available to Cannabis and hemp/CBD businesses can be daunting, but the good news is that there are carriers out there that can write the policies that you need. In reality, and depending on the vertical structure of the Cannabis business at hand, almost everything should be considered for coverage. Some of the coverage to consider for a Cannabis/hemp/CBD business include General Liability, Product Liability, Loss of Use, building and business packages, lessor risk, and transportation, to name but a few. Your trusted Cannabis insurance agent can assist in putting together a comprehensive package that will suit your company’s needs.
Product liability is a type of coverage that is extremely important in the Cannabis industry, as this will provide coverage should those products become unusable or unsalable. Molds and parasites can wreak havoc on Cannabis plants, and if there is ever a need to destroy them because they are unusable, liability coverage on the product may provide reimbursement for loss of revenue. This will also come in to play if the plants are damaged by excessive temperature swings or over-saturation due to equipment malfunction. Companies may also be provided protection against product lawsuits with a good product liability policy.
Another area of insurance coverage that deserves attention is Errors and Omissions (E&O) insurance. E&O coverage can be carried by a company or an individual, and protects against lawsuits filed by clients that claim that the company was negligent because of an error or omission of information.
While many insurance companies will flat out deny a Cannabis CEO coverage, others may offer policies, but may be scammy and unreliable. To ensure that you are finding a trustworthy carrier who will help you get paid for all potential claims, we have a few tips for you to consider:
Find Agents with Experience -- Search for agents who have served a wide range of Cannabis businesses and have a track record of selling Cannabis-friendly coverage. The average agent knows very little about Cannabis or the coverage necessary for various verticals. You want to make sure your agent is your knowledgeable advocate when it comes to finding the best carrier for the business you serve.
Accept No Less Than “A” Rated Carriers -- Ensure that the carriers your agent uses are highly-rated. If they don’t have a rating of “A” or “A+”, you may want to consider an alternative carrier or agent. A rating of “B” or lower implies that the carrier provides inadequate coverage or subpar service for previous clients of theirs..
Ensure Your Agent Knows the Right Questions to Ask -- A Cannabis CEO may not know the right lingo or questions to vet a carrier, but an Cannabis-oriented agent should. The most knowledgeable Canna insurance agents will talk to both potential clients and carriers about key coverage areas like product liability, loss of use, limits analysis, and various facets of a grow or dispensary are indicators that you are on the right track with your agent.
Cannabis-friendly insurance carriers are an essential, but sometimes intimidating, aspect of the Cannabis industry. If you’re an accountant helping Cannabis CEOs navigate the ins-and-outs of their business, get comfortable with Cannabis insurance lingo, limits, and policies. If you are a Cannabis CEO, this information is a great place to start as you look for the best agent and carrier for your enterprise.
DOPE CFO is always happy to lend a hand when it comes to running a compliant and successful Cannabis company. To learn more, please check out our podcast Important Considerations for Picking an Insurance Provider for Cannabis Companies, where we were joined by our resident Cannabis insurance and accounting expert, Brenda Bader! Brenda goes in-depth into what Cannabis companies can expect when they set out on their quest for excellent insurance coverage, and much more. Subscribe to our podcast to make sure you receive the most up-to-date info in the Cannabis realm.