What Is a COI, and Do I Need One?

A certificate of insurance (COI) can be beneficial for cannabis startups. Let’s review the details of a COI and how you can manage risk savvily.

It’s not unheard of for founders or management teams to consider insurance buying an obligation. And sure, when you run a successful cannabis business, it’s undoubtedly a task you must check off your to-do list. But risk management is more than merely having proof of an insurance policy. That said, let’s talk about COIs and whether you need one. 

What Is a COI?

A certificate of insurance (COI) is a statement of coverage. It’s a lot like the auto insurance card you stash in the glove compartment of your vehicle. A COI is typically no more than one page and sums up your business coverage. Clients might require this one-page statement to do business with you as it verifies that your company is insured. Conversely, you might have asked for a COI from business partners. COIs contain the following information:

  • Policyholder’s name
  • Type of coverage
  • Policy effective date
  • Policy limits

With a COI, you don’t have to show your entire commercial business insurance policy to a client, which could be rather extensive depending on your coverage. Instead, you only need to submit a condensed one-page COI to them.

Because COIs are easily digestible and straightforward, they often build confidence in clients, much like a positive review or reference. But don’t be surprised if a client requests more details about your liability coverage. What’s more, we encourage you to dig a little deeper with your cannabis partners, as well. But why?

Keep in mind that COIs don’t contain exclusions or endorsements. While they’re a quick reference for basic insurance (i.e., general liability), they aren’t the complete picture. However, a COI is a decent place to start.

Does Your Cannabis Company Need a COI? 

Plenty of companies in all sorts of industries use COIs to create more seamless business collaborations, from hair salons to tech companies. Whether or not your cannabis company needs a COI depends mainly on your operation. Do you have unique liabilities? Do you face situations where you need to prove your insurance status quickly?

These considerations, and more, come into play when thinking about requesting a COI from your insurer. However, there are a few other things to think about when requesting a COI, such as:

  • Matching the name of your cannabis company to the name on the document
  • Double checking that the limits listed on your COI provide sufficient coverage
  • Verifying the effective and expiration date 

As mentioned, COIs are a quick and easy way to prove you have sufficient insurance coverage; however, you must keep your coverage current and appropriate for your clients. After all, this information is the first thing you look for when vetting business partners of your own.

Is Acquiring a COI a Sufficient Risk Management Plan?

The short answer is no.

While a COI is a convenient statement to have at your disposal, it certainly doesn’t make up your entire risk management plan. Instead, a robust risk management plan will be multi-faceted and highly comprehensive. 

Here’s the thing; the more you rely on other companies within the supply chain, the more you need to consider your unique liabilities — and cover them! For example, consider the loads of issues cannabis companies faced post-pandemic, particularly with the supply chain. Some companies along the supply chain didn’t maintain valid insurance products, and those doing business with them suffered.

Have these risk management controls in place and partner with businesses that aren’t a liability to your operations. This approach is crucial to your success and longevity in this industry. While COIs are often beneficial for some clients or during crunch time, they aren’t a fix-all. We encourage you to go beyond this one-pager and follow up on your business partners — and let them follow up on you —  to ensure you cover your liabilities. 

Protecting your cannabis 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 emailing [email protected] or calling 646-854-1093 to learn more about your cannabis insurance options.

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