Proper insurance coverage helps protect your business as it expands, says Mike Bush, partner at National Cannabis Insurance Services, but deciding what type of insurance your operation needs can be daunting.
“Just like any business, insurance is a prudent element of protecting your business,” Bush says. “[And] just like the cannabis industry, the cannabis insurance market is evolving.”
Common areas of exposure for cannabis businesses include:
- Property
- Net income
- Liability
- Personnel
RELATED: 10 Common Insurance Coverages that Might Apply to Your Cannabis Business and Product Liability and Crop Insurance: The Must-Have Insurance Policies to Protect Your Cannabis Business
Below are 4 insurance considerations to make when deciding on a business policy for your cultivation operation:
Variability of Coverage
Insurance policies for cannabis businesses can vary widely, making it important for business owners to have guidance on understanding and protecting their operation’s unique exposures and the details of what is and is not covered in the policy, Bush says. State insurance requirements vary, although some states now require general liability and product liability coverage, he says. Insurance limits also vary by state.
What’s Required & What’s Needed
Although some insurance policies are not required by law, cultivators should still consider them to protect their businesses against damage and loss, Bush adds. For example, cultivators risk losing their business if they lose their crop and don’t have crop insurance. In addition, cannabis operations face unique property challenges including finished stock, product and cash theft, and should consider property insurance to protect themselves against these common exposures.
Insured Events: Will You Be Covered?
Business owners should also keep in mind that an insurer will only pay for a loss if an insured event takes place, as defined by your insurance policy. Insured events usually have a defined covered property or activity, cause, consequence, circumstance, location and time period. Every policy contains exclusions, as well, which define what is and is not covered. These can create gaps in coverage, and some policies include exclusions that reduce or eliminate obvious cannabis business exposures.
Cost Analysis
Cannabis businesses owners worried about the cost of insurance should strive to find a balance between being insurance rich and cash poor, Bush says. “The risks and potential litigation in this industry are very real. Passing on appropriately covering your business puts everything you work for at risk. Waiting for claim precedent or state requirements to catch up to the risk may be too late if a claim occurs,” he says.
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