The cannabis industry is experiencing enormous growth, with many states legalizing the sale of cannabis. Legitimate marijuana companies are springing up, and the industry might grow to about $146.4 billion by 2025. Therefore, risks become inevitable with this growth.
Many people are searching for natural solutions for their health problems, and this is why they consume cannabis products. Both recreational and medical marijuana provides various health benefits as they can fight anxiety, depression, skin problems, chronic pain, and heart issues.
Fortunately, cannabis products come in different forms, like edibles such as gummies, concentrates such as phoenix tears, tinctures, etc. This makes sure that even those who do not smoke can find enjoyable ways to use cannabis.
Because of the unique risks that marijuana businesses face, minor problems might lead to a loss of a business license or an expensive lawsuit. The regulations governing both recreational and medical cannabis are continually changing, and they can be different from one state to the other. This creates a legal battlefield that the right cannabis insurance coverage might help you survive in the industry.
What is cannabis insurance?
Cannabis insurance is an assortment of business policies that help cover risks intrinsic in the cannabis industry. Nonetheless, distinct marijuana operations need different types of cannabis insurance policies.
Cannabis businesses such as dispensaries, testing labs, cultivators, processors, and physicians need insurance cover. General liability insurance is the most popular type that cuts across all marijuana businesses.
Do you really need insurance for your cannabis business?
It is a question that most cannabis business owners ask; it is necessary to have an insurance cover for your business. Cannabis insurance is amongst the many ways that you take to protect your company’s assets. Also, it helps reduce claims from your customers and transfers the financial risk of a raid or theft.
In extreme cases, you can lose your entire inventory in case of a disaster or be behind bars because your customer gets sick after consuming your product. The investment you work hard for, including your time, money, and resources, will disappear within a wink of an eye.
Isn’t this scary and disappointing? However, with the insurance cover, you can avoid such traumatizing incidents.
It is crucial to discuss the benefits of different kinds of insurance covers available for your business so that you understand in-depth why you need insurance services. They include:
- Commercial general liability
It is an essential business cover since it protects you from common claims that most cannabis businesses face. It covers litigations from various claims of property damage and bodily injury to your customers or other third parties that happen in your facilities.
General liability will cover you from injuries claims that relate to falls and slips. It is necessary if you are contracting with partners, attending a conference, or leasing property. The fees it covers include medical expenses and repair bills by the third parties, and the legal fees if third parties sue you. Some of the general liability policies include coverage cost for harm due to defective products.
- Cannabis product liability insurance
The most significant risk in the cannabis industry is the litigation that arises because of their products. A cannabis plant passes through many processes, from growing to harvesting to processing to distributing and retailing. Many cannabis business owners have little or no knowledge about even when to harvest cannabis, and this may decrease the quality of product.
Most states anticipate that such cases may arise because of a response to a new product and urge cannabis business owners to have product liability insurance. Typically, the main concern that comes with cannabis products and of course, an area of risk exposure for your cannabis business is accidents due to injury/harm.
Usually, different cannabis businesses (distributors, processors, cultivators, and dispensaries) are liable if a fault in their products cause harm to a third party even if the injury is because of the third party’s poor judgment.
- Commercial property insurance
It is an insurance policy that covers your property. However, the destruction of some items in case a covered event occurs means that you will receive the insured value after deducting some money (the depreciation value). Windstorms, fire, theft, hail, and vandalism are amongst the common events that this insurance policy covers.
You can use your business owner’s policy to cover risks relating to a property, but only if you do not own a lot of property and have few employees, less than 100 people. Also, it is possible to use a business owner’s policy if you earn a revenue of less than $1 million. Business owner’s policy combines general liability and property insurance, of course, for a reduced premium.
- Cannabis equipment breakdown insurance
Very high-security systems protect the valuable cultivation, processing as well as manufacturing equipment that are fit for your cannabis business. The standard property insurance covers may not provide sufficient coverage for cannabis high-value equipment.
Therefore, cannabis equipment breakdown insurance indemnifies against damages or losses due to the breakdown. It covers losses as a result of the breakdown of particular kinds of equipment such as alarm and security systems, computers, air conditioning equipment, fire detection systems, among other equipment.
For instance, a power surge may damage your computer system, or the processing equipment suddenly breaks down. This policy will cover the cost to replace or repair the equipment and also pays for an income loss from such interruptions.
- Commercial crime insurance
Cannabis is a business that requires a pretty large amount of money. Thus, it is wise to get a commercial policy that covers financial losses resulting from illegal activities.
The policy will typically pay for your stolen securities and money, whether the thief is your employee or an outsider. Forgery, employee dishonesty, computer fraud, extortion, ransom, and kidnapping are some of the illegal activities included in this cover.
- Commercial auto insurance
It is common for a cannabis business to face some of the standard auto use liabilities while transporting cannabis, whether during cultivation or selling. Besides having a typical auto transport policy like any other business, you should have cargo insurance that also addresses security problems during loading/offloading. As well, it addresses various risks that might occur during the transportation of the product.
Many insurances will cover the damage to the third parties involved by the vehicles. But it is prudent to cover the damage to your autos too.
In addition to your auto insurance policy, you can have one or more of the following covers:
- Hired and non-owned auto – it covers damage to vehicles that you hire, lease, or borrow. Also, it includes the damage that these vehicles cause.
- Comprehensive – it covers damages to business-owned vehicles as a result of various things other than cargo or auto accidents.
- Collision – covers damage to your business-owned vehicles due to auto accidents.
- Errors and omissions insurance (professional liability)
It covers the costs when a customer or third party accuses you of making mistakes that lead to financial loss. The policy covers costs like court costs, settlement costs, and attorney’s fees.
Cannabis businesses that deal with medical marijuana face the excessive risk of negligence claims in the cannabis industry. People can sue healthcare providers who recommend or prescribe cannabis use if their products do not cure or fight their ailments.
An example of how Errors and omission policy can help you is when a customer sues you for malpractice if the cannabis product you prescribe sends him to the emergency room. Thus, your E&O policy will pay for the lawsuit cost.
With technology advancements, many people order their products online. Various marijuana Canada dispensaries offer quality marijuana product like cannabis edibles, concentrates, flowers, and seeds. Because of typing errors when customers ask for product information or on the products’ labels, these online dispensaries may face claims. Therefore, the E&O policy is the best solution for this problem.
- Cannabis workers’ compensation insurance
It is a policy that covers harm or injury to your employees. Nonetheless, the harm should happen in the course of his employment. The exposures include:
- Medical treatment.
- Wage replacement benefits.
- Vocational recovery.
Even in any other business, workers’ compensation is necessary since it’s a requirement in many states. A claim by an employee may lead to financial loss because you may pay a high amount of settlement.
The combination of federal illegality, state regulation, and cannabis might make it challenging to run a cannabis business. Still, you can run a successful venture with the help of an insurance policy that is specific to your risks. From the above various kinds of cannabis insurance covers, it is possible to have more than one insurance policy and also it is possible to have an insurance policy that covers two risks.
It is prudent to do your homework and research on the trusted cannabis insurance companies to choose the best among them. You can do this with the help of a broker or ask other cannabis business owners. Also, plan ahead and ensure that you know your state’s requirements concerning cannabis.