Myth vs. Reality: Debunking 5 Common Cannabis Business Insurance Misconceptions

Standard business insurance policies do not cover all of the risks associated with a cannabis business.

Cannabis has nuances and peculiarities in the risk management world that a standard business insurance plan may not cover. The regulations governing the industry are complex and subject to change frequently, and your insurance policy must be able to adapt to them.

Take cannabis cultivators. Growing cannabis plants is a labor-intensive task where your profit rests on the success of your harvest. But extreme weather conditions, like a flood or fire, can ruin your crop and leave you without. Crop insurance helps protect against this.

Product liability is also tricky in the cannabis space. THC level limits are set by states for cannabis businesses and by the federal government for hemp businesses. A product recall due to a discrepancy in the THC level can have a negative impact on your profit and loss if you don’t have the proper product liability insurance policies to cover it.

There is some truth to the myth that cannabis insurance is pricey — but you get what you pay for.

Insurance policies act as a safety net for your business, helping you mitigate risks, cover exposures, and protect your investment. It’s not inexpensive to start a cannabis business and you’ll sleep better at night knowing that your business is fully covered.

Insurance is an investment in the future of your business. Paying for a cybersecurity policy is far less expensive than paying out of pocket if your customer’s data is stolen during a cyber attack. Paying for theft insurance is less expensive than covering the cost of a break-in. Your investment in your business deserves protection, and the proper umbrella of cannabis coverage helps you maintain long-term financial stability.

There are many factors that influence cannabis business insurance premiums — whether you’re a plant-touching or ancillary business, if your business has an extensive claims history, the city and state you operate in, and security measures, to name a few. But on the other side of this, there are many steps you can take to help reduce the cost of your premium while continuing to invest in your business.

Consider implementing robust security protocols to reduce your risk of theft, following cyber best practices to ward off phishing scams, and asking your insurance broker about bundling policies together to save money.

There are many different kinds of cannabis insurance policies that protect you from unique exposures and risks. One policy does not cover all — you need a custom umbrella of coverage to provide your business with adequate protection.

Product liability insurance protects your business from claims of harm by a product, while auto liability protects your drivers delivering products on the road. Property and casualty insurance protects your business properties from harm while theft insurance can reimburse you in the event of a break-in. Each policy covers a piece of the puzzle and together they provide you with a robust safety net.

The exact suite of coverage a cannabis business needs is unique — based on your business size, operations, location, and more. Working with a cannabis insurance broker ensures you have an experienced eye on your business to spot any exposures and keep you well-protected.

Ten years ago, finding insurance for cannabis businesses was like searching for gold. But today, there are a growing number of insurers who offer cannabis business coverage and even some that focus exclusively on the cannabis industry.

Despite the fact that cannabis is still on its way to becoming federally legal, insurers can work on a state-by-state basis to help your company get the protection it needs. Insurance availability can vary by state and knowing your state’s regulations is very helpful in your search for insurance. But don’t call the search off before you begin — there are cannabis business insurance providers out there who are happy to help you.

While it is true that having an insurance broker isn’t mandatory for getting cannabis business insurance, it’s a bit like going for a sail without a captain.

A broker is steeped in experience and can deftly help you navigate the choppy waters of the cannabis industry. Insurance language is complex and coverage options are nuanced so having a broker to steer you through makes the process much easier.

An insurance broker can often help you get a better rate than you would be able to get on your own because they can negotiate with insurance providers. In the event you have to file a claim, your broker can guide you through the process (and the paperwork) to make it move as smoothly as possible. Brokers live, eat, and breathe insurance like you do cannabis, and they’re always in the loop on the latest insurance trends that can affect your policies.

Additionally, working with a cannabis-specific insurance broker gives you a leg up, because brokers have to stay up-to-date on regulatory changes on the state and federal level. You have a business to run, so let an expert help you with the complex world of insurance. You’ll be happy you delegated it.

Cannabis is an industry that moves quickly. While the same isn’t always true for insurance, these two industries have learned how to grow together over the past 15 years as legalization spread throughout the United States. When it comes to finding the best cannabis business insurance for your company, choose a broker who acts as an extension of your team.

Protecting your hemp company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by email [email protected] or calling 646-854-1093 for a customized letter or learning more about your hemp insurance options.