Smoke and Mirrors… Insuring the Cannabis Industry

Though the Cannabis Industry continues to grow, it also continues to receive skepticism from governments, banks, and insurers. But not for long! This persistent uncertainty, along with lack of loss data, makes it difficult for insurance companies to develop an underwriting strategy for this class of business. There are many factors and risks that lead to apprehension from insurance carriers, so how do you “weed” through the available products to ensure you find coverage that safeguards your business?

For any business operations, Commercial General Liability insurance is a must have. It will protect your products and services, provide coverage for legal expenses, and cover issues like mold, mildew, and bacterial exposure to products.

The Cannabis industry faces claims such as:

  • Natural Disaster
  • Theft
  • Vandalism
  • Regulatory Lawsuits
  • Pollution
  • Errors & Omissions/Malpractice
  • Product issues
  • and more…

Coverage for Stock

Raw stock, stock in process, and finished products/inventory of the insured can be covered under a Stock Throughput insurance policy. Stock can be covered at the selling price which allows the insured to be covered for the time lost at each point of processing. Work with an experienced broker who can advise of the limitations or optional coverage to protect your inventory.

Protecting Investors

Right now in the industry, Cannabis businesses are desperate for D&O (Directors and Officers) coverage… and it’s not cheap.  Many insurers are hesitant to provide coverage due to the regulatory environment. The directors and officers, managers, or investors of your company can be insured against negative actions. This type of protection is crucial, as it is one of the top exposures in this sector. Should you obtain coverage? Absolutely.  But make sure you work with a broker who is knowledgeable of the available products and exclusions.

Be Prepared to Answer Questions

Due to the fact that insurance carriers are apprehensive when offering cannabis related coverage, there is a detailed underwriting process. You may have to complete various applications and provide documentation, such as your company’s current or projected financials, experience in the industry, etc. A variety of factors go into determining your company’s eligibility with each insurance carrier, so more accurate and complete information will work in your favor.

“Don’t let the fear of striking out keep you from playing the game”

 

In other words, there ARE options for your Cannabis-related business to find and secure affordable yet comprehensive insurance. If you have any questions or need advice, feel free to contact me at any time. Having experience in this specific class of business, I’m confident I can help protect your company from growing exposures.

 

 

 

Opinions expressed in this article are solely the author’s opinion, not intended to provide the reader with legal or any other professional advice. Should you need advice or opinion, consult with a qualified professional to address your specific needs.

 

 

 

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