While many cannabis business owners may be tempted to just tick off the required boxes to meet their insurance needs, that could be a mistake that costs them dearly. Here are some tips and best practices to help business owners successfully navigate their insurance needs, put together with input from TJ O’Connor, sales director with Intrepid Direct Insurance.
What types of insurance do you need? There’s no single definitive answer, but for most cannabis businesses, the following policies are recommended:
– General Liability: Covers slips and falls and similar incidents.
– Product Liability: If you sell a product that has a manufacturer’s defect, such as a faulty vape pen, and the user is injured by it, you can be liable. Product liability insurance can protect your business in this type of situation.
– Budtender’s Professional: This covers your business if a budtender gives advice and there’s an adverse reaction or injury.
– Building: Protects the building and permanent installations.
– Business Personal Property: Protects anything inside the building that’s not bolted down, including cash, stock and inventory.
– Tenants Improvements and Betterments: If you rent/lease, but make improvements to the property, your investment is covered if there is damage.
– Stock/Inventory: Specifically, your cannabis inventory (flower, edibles, etc.). Sometimes this is covered in the Business Personal Property policy, and sometimes it’s called out separately.
– Business Income: Replaces lost revenue, wages and extra expenses in the event of a harmful weather event or utility outage, or following a fire or other event.
– Worker’s Comp: Payroll, class codes and loss experience impact your costs for these policies.
– Auto Insurance:
– Hired and Non-Owned Auto: Covers an employee using their own car for a bank deposit or similar ancillary errand for the business.
– Owned Auto: Covers the same but for autos actually owned by the business.
– Different/additional coverage would be needed to cover delivery.
– Marijuana Liability: Similar to what bars carry (Liquor Liability) to protect against damage caused by a patron overindulging in product.
Questions to Ask
Now that you have an idea of the coverage you’ll need, it’s important to know what to ask when you start talking to providers. Here are some good starting questions:
– Who will I call when I need to make a claim? (This will tell you if you are buying direct or going through brokers/agents, and simplify communication in the event of a crime or event.)
– What limitations are in the policy?
– Are there theft limitations for unsecure stock?
– What security measures are required to ensure full payment?
– Does my General Liability policy cover Product Liability?
– Does my policy have an inflation guard?
– How often should my policies be reviewed to ensure my coverage is still correct?
– For Business Income coverage, is coverage limited for any time period? Is there a waiting period? How is lost revenue determined?
– Does my General Liability or Budtender’s Professional policy have a “professional liability” exclusion?
– Do I need to have any policies in place in order to submit an application to open a dispensary?
Finally, before signing on any dotted line, read through these tips to help ensure you are getting the best value for your money and understand, fully, what you are signing up for.
– Thoughtful dispensary design matters. For instance, when purchasing display cabinets, think beyond just aesthetics. How secure are the cabinets against robbery? How will you secure product at night? Would movable/rolling cabinets — where the entire fixture is rolled into a secure room at night — save time and money for your staff as well as saving money on premiums?
– Read the fine print. Be sure you understand the limitations in the policy — otherwise your claim could be denied. Example: Your policy requires you to secure all product at night in an off-the-floor secure room or vault/safe. If you are robbed/burglarized and you haven’t met these security requirements, your claim can be fairly denied.
– Understand the terminology. Different companies can use different words and descriptions for the same type of policy and may include different types of coverage in their plans.
– Don’t just shop on price. Of course price matters, but insurance is rarely “apples to apples.” A cheaper policy may be deficient in important areas that could cost you dearly after an incident occurs.
– Know your state’s requirements. Every state (and sometimes city) has different requirements, from extremely stringent requirements in Michigan and Massachusetts all the way to lenient guidelines in Oklahoma. It’s your responsibility to know the requirements and meet them.
– Account for all the positive measures you have in place and be sure you are getting any discounts you are entitled to. If, for example, you invested in a top-notch, TL-rated safe or GPS trackers to protect cash or product, or developed a comprehensive safety plan, or did anything that will positively impact your facility’s security, tell your insurer because there’s a chance you can either get a higher policy limit or a discount on your policy.
– Make a list of all stock, inventory, office furniture, electronics, equipment, etc., so you have ready access in case of a loss.
Lisa Moughan is the director of marketing at 3SI Security Systems. Moughan joined 3SI in 2014 and has been involved in strategy, digital marketing, market research and branding. Her recent focus has been on growing the cannabis market’s knowledge of how the right security technology can protect staff, customers, product and profits.