Cannabis business owners should select an insurance provider that is cannabis-specific and one that can help guide them through the process of selecting the right coverage. This includes identifying the operation’s exposures and the types of coverage that can provide adequate protection, according to Mike Bush, partner at National Cannabis Insurance Services.
Here, Bush identifies important questions to ask insurance providers when selecting policies to ensure business owners make educated decisions when choosing coverage.
1. What are my biggest exposures?
A cannabis business’s biggest exposures typically include:
- Product liability, where your product has adverse effects on a customer;
- Product recall, a voluntary or mandatory recall of the company’s products;
- Loss of crop, which can be due to fire or sprinkler damage; and
- Theft, whether by an outsider or an employee.
Business operators should talk to their insurance agents about these and other common exposures to identify which ones are most applicable to the business, Bush says.
2. In the event of a claim, how will I know I’m covered?
Business owners should be aware of their biggest exposures and common coverage gaps, Bush says, and then discuss them with their insurance agents to understand which ones can be covered by insurance. The agent should review the company’s coverages and make the operator aware of what is covered and what is excluded in the policy.
3. What are the most important coverages?
Product liability, property and crop insurance are typically the most essential coverages in the cannabis industry, Bush says.
Product liability covers areas of exposure such as warning labels, impairment, breach of contract and product recall, among others, and can be included with a general liability policy or purchased separately, he says.
Property coverage covers losses to buildings, personal property, business income and machinery, while crop insurance protects a cultivator’s crop from fire, soot, water and temperature throughout the growing cycle, Bush adds.
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4. What are the common coverage gaps?
Understanding what gaps exist in an insurance policy is as important as knowing what the policy covers. Business owners should ask their insurance agents about common coverage gaps in the cannabis space, which include defense costs within the limits of the policy, the exclusion of product recall expenses and impairment and health hazard exclusions, Bush says.
5. Why should I buy crop insurance?
Crop insurance is one of the must-have insurance policies for cannabis businesses, Bush says, and it is important for insurance agents to outline the reasons for a cultivator to purchase this coverage.
A crop insurance policy protects cultivators if there is a loss to their crop under certain conditions, such as fire, lightning, wind, hail, theft and sprinkler damage, Bush says. And since a cultivator’s crop is his or her source of income, the plants must be protected.
“Protect your assets, protect your income,” he says.
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