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The Right Insurance for Cannabis Businesses

16 October 2020 / Category: Blog
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The cannabis industry is one of the fastest-growing industries to date, and as sector grows and becomes more regulated, the exposure and risk grow right along with it.

The degree of uncertainty that surrounds the legality of cannabis has led insurance carriers to be reluctant in offering broad policy terms and adds to the challenge of finding the right coverage. This is an ongoing battle for many cannabis entrepreneurs, as they struggle to get proper quotes and find agents who understand cannabis policies. Without the right guidance and expertise, a business owner is often left holding inadequate insurance policies with significant gaps in coverage.

Biggest Risks Facing Cannabis Businesses

  • Product Liability

Being liable for a defective product, is one of the biggest risks for a cannabis business. It is crucial that products are labeled correctly and  you are following all regulations to ensure your product is safe. Yet, there is still a chance that property damage and bodily injuries can result from the use of your cannabis products, not to mention that contamination from fungus, molds or pesticides can result in major product recalls and liability.

  • Legal and Regulatory

The legal status of cannabis is still a hotly debated topic in the country. Many states have legalized the use of medical and recreational cannabis. However, cannabis is classified as a Schedule 1 drug, which makes it federally illegal. This results in a very complicated legal setting for cannabis businesses operating under state laws. Which makes it another potential risk for cannabis businesses.

  • Financial Risk

Regulated banks tend to avoid accepting proceeds from cannabis businesses. Otherwise, they risk losing their federal charters. With this regulation, cannabis businesses are forced to pay employees, taxes and other dues in cash or get stuck utilizing high interest money conversions. Cash in hand inevitably leads to security issues and the potential for theft.

Finding the Right Insurance Broker

Since the cannabis industry is still finding its way through the complexities of federal laws, there are only a few who understand state business laws and requirements and on how they relate to the cannabis sector.

To ensure that you can trust a carrier who will help get the correct cannabis insurance coverage, we have a few points for you to consider:

1. Your chosen agent should know the right questions to ask

A cannabis business owner does not necessarily know all the trade words, lingo or questions to check out a carrier but a well-rounded cannabis agent should. A good cannabis insurance agent knows how to talk to both clients and carriers on key points of coverage, like product liability, workers compensation, business auto and on the different policies from seed to sale.

2. Accept only “A” rated carriers

If a carrier has a rating of “B” or lower, it implies that the carrier does not provide adequate coverage and/or has subpar financial status. Make sure that you can verify that your carrier has an “A” or “A+” rating, otherwise you may want to reconsider and find an alternative carrier or agent.

3. Find agents with experience

Look for agents who have successfully sold cannabis insurances to a wide array of cannabis businesses. An average agent might know little or the specific coverages necessary for your business. You agent should be your advocate in finding the best insurance carrier for your needs.

4. Stability

In the dynamic field of cannabis insurance, your carrier should be constant. Try to learn how the company started and how long it has been around. Make sure that the insurance carrier is strong and stable so you will have the confidence that you do have a long-term insurance partner

When it comes to cannabis insurance, coverages will vary depending on the nature of your business, operations, and the specific needs of your company. In a dynamic environment that faces many risks, speaking with a cannabis insurance broker will help you find the right coverage to adequately protect you and your cannabis business.