As a business, the first step to mitigating risks is being insured. Cannabis insurance companies provide specialized support to businesses in the marijuana industry. This support may include issues that other insurance companies are unable to handle..
The nature of your business determines what insurances are a necessity. Your coverage requirements changes depending on whether you’re a cannabis cultivator, dispensary, goods manufacturer, etc.
Before you get into the big details, you need to know about the cannabis laws in your area. Insurance companies won’t agree to work with you if you go against federal or state regulations.
Like any business start-up, you’ll feel confused about where to begin. This guide will help you understand what types of insurance you need and why.
What cannabis business Insurance Should You Invest In?
Getting one general insurance policy from an insurer isn’t going to cut it in the cannabis industry. You’re at risk from all angles, so you need all-rounded protection.
Here are five crucial insurances that you should get:
1. Directors & Officers Insurance
Directors and Officers insurance, also called D&O insurance, is fundamental for protecting your personal assets.
D&O insurance is focused on senior position holders and officers within companies that deal with its decision-making, fund allocation, and other executive functions.
In recent years, D&O lawsuits have spiked, which puts corporate leaders at increased risk. They’re more likely to face true and false accusations that put them in compromising positions. They’ll also be forced to use their own funds to fight off these claims.
Having D&O insurance protects your personal assets. It covers legal fees, settlements, and any charges related to lawsuits. This helps to keep the company’s balance sheet from suffering..
The two most common D&O allegations are misrepresentation and fraud. Both of these claims can be fought through the right D&O insurance policy, which protects you until the claims are proven true.
2. Property & Casualty Insurance
You can look at these as two separate insurances.
Property insurance deals with land, buildings, and physical workspaces. It protects you in case of accidents such as fires, short-circuiting, etc., theft, and vandalism.
Your inventory, supplies, computer systems, and servers come under belongings protected through the policy. In case of damage, the insurance can cover repair and replacement.
On the other hand, casualty insurance deals with claims against you. That means it covers for damages or injuries you or your company may have caused others.
Those who file lawsuits against you can be customers or employees of your own business.
General liability insurance, discussed later in the article, may help you in some cases, but casualty insurance provides better coverage. As for dealing with employees, having Worker’s Compensation insurance is a smart move.
Since property and casualty lawsuits include large payouts such as medical bills, damages, fines, and so on, having proper insurance can save your business from paying. That can help you avoid bankruptcy and other serious hurdles.
3. Cyber Insurance
A 21st-century staple, cyber insurance is a no-brainer. Any company, group, or organization can’t function confidently without it.
Cyber attacks are a leading cause of start-ups shutting down. They’re lethal enough to lead companies into a crisis and eventual bankruptcy by driving away customers.
If you’re functioning online in any way, you need to be insured. Handing user data and your information is a big responsibility because a single malware or attack can throw away years of effort.
Security breaches are becoming common and making customers paranoid about trusting businesses. A single breach will be enough to break customer trust if you collect personal data such as names, addresses, credit card numbers, etc.
By getting cyber insurance, you’re covered for any liability related to data breaches or stolen information. It isn’t a comprehensive policy, but it can come in handy in most scenarios.
4. Product Liability
For any cannabis business that sells consumable goods to customers, product liability insurance is a must-have. That can include smokable marijuana, CBD oils, cannabis-infused foods, etc.
Your product can be held responsible for harming users. They may have allergic reactions, side effects, or other undesirable results from ingesting your goods, which could lead to a hefty lawsuit.
You can attempt to mediate with the party through your customer support teams, but at times it’s hard to come to a positive conclusion. So, product liability insurance could help you out here.
Other than legal defense costs, it’s also useful during a product recall, breach of warranty, and other problems.
The tricky thing is knowing whether your product is at fault, so quality control shouldn’t be compromised. In the off chance something goes wrong, product liability insurance can help you pay off costs that would otherwise empty out your pocket.
5. General Liability
One insurance you should get your hands on as soon as you start your business is general liability. That covers injuries to the body or damages to property, which are common occurrences.
The main point to remember is that this insurance comes in for accidents. The situation gets complicated if there’s foul play involved.
Some other circumstances are also covered under general liability, such as copyright infringement, reputational harm, and advertising injury.
Other than customers, rival companies can also come after yours. Defamation and copyright claims are the most common company-on-company lawsuits seen. With how niche the cannabis industry is, you might accidentally step on someone’s toes.
Being insured keeps you from paying out of pocket for such cases and saves your reputation.
Here’s all you need to know on different insurances for your canna-business. Risk management is important; one way to do it is through the right insurance.
Ensure your coverage is enough to protect as many aspects of your company as possible, and follow government regulations to stay clear of trouble.