Ever since the legalization of recreational and medical marijuana became widespread in the U.S., the cannabis market has been growing at a rapid rate. In fact, in 2020 alone, legal cannabis sales went up by 46%. However, the growth of this market has also attracted risks in equal measure. Given this substance is still termed illegal under the 1970 Controlled Substances Act, cannabis businesses still face antagonism from the authorities, the general public, and even regulatory bodies such as FDA. Moreover, stringent business practices coupled with conflicting state and federal laws, make it difficult for these businesses to access the right insurance policies. Here’s a detailed look at essential insurance coverage options for cannabis businesses.
The right insurance policies can help protect cannabis/hemp businesses against the above-named risks. For instance, a commercial auto insurance policy can protect a cannabis business from any financial losses related to motor-vehicle accidents.
The cannabis/hemp supply chain consists of different businesses with unique insurance needs. The different cannabis businesses that need insurance include:
Every year, 1 in 12 small businesses in the U.S. collapses. While many reasons contribute to such failure, financial loss is one of the major causes. One way of managing financial loss in a business is to carry all the necessary insurance policies. For a cannabis business, the essential insurance policies include:
General liability – This policy covers third-party liability claims that may result from bodily injuries and property damage, among other things.
Product liability – Cannabis can cause side effects such as addiction, cognitive impairment, psychosis disorders, and impaired motor coordination. This exposes cannabis businesses to product liability claims and litigation risks. Product liability insurance covers the costs associated with such claims and lawsuits.
Commercial auto – This policy covers damage to business vehicles in the event of a covered accident, as well as the resulting liability claims.
Hired and non-owned insurance – This coverage protects you or your employees from car accidents involving personal or hired vehicles used for business purposes. It is suitable for cannabis delivery businesses.
Commercial property – This policy pays for financial losses in case your business property gets damaged/destroyed from perils such as fire, vandalism, theft, and natural disasters.
Business interruption – With the stringent business practices surrounding cannabis businesses, it is not unusual for such businesses to face regular interruptions from the authorities. Business interruption insurance covers the income lost during the interruption period.
Workers’ compensation – This coverage is essential for any cannabis business that has employees. It provides various benefits to eligible workers including medical care, income replacement, disability, and survivor benefits in the event of fatalities.
Cargo insurance – This policy is suitable for cannabis delivery services, and it protects against financial losses resulting from lost or damaged cargo.
Crop insurance – Similar to other farmers, cannabis cultivators face the risk of losing their cannabis crops to natural disasters or unfavorable weather conditions. They also risk incurring losses in case market prices plunge. Crop insurance is a policy that shields these farmers against such eventualities.
Errors and omissions – This policy pays for the resulting legal costs in case someone sues you for a professional mistake. For instance, in case technicians in a cannabis testing laboratory mix up ingredients, produce wrong results, and do not label them on the products, a customer can sue the business.
If you own a cannabis/hemp business, you should protect your investment with the right insurance policy. At GrayStone Insurance Group, we specialize in high-risk and hard-to-place businesses. We write accounts that other agencies struggle to place. We will help you obtain customized insurance coverage, tailored to suit your business needs.
