By: Bob Vidal, Vidal Insurance Agency
One of the first things a new Canna-business owner learns is that they have pretty limited choices when it comes to purchasing property and liability insurance. Unfortunately, because Cannabis is federally illegal, the standard (big name) insurance carriers avoid the space. This leaves the Cannabis industry forced to find coverage in the Excess and Surplus insurance market, otherwise known as E&S. That’s not necessarily a bad thing, there are some advantages to the E&S market. But it does require an added amount of diligence & caution when shopping for coverage there.
Compared to the “standard market”, where the companies we’re all familiar with reside, most people have never heard of the carriers in the E&S market. As a general rule, if you’ve seen a commercial for an insurance company on TV, that company does not insure cannabis.
Some even refer to the E&S markets as the wild west of insurance. That’s because there are far fewer rules governing policy language. E&S policies are not standardized or filed with the state insurance departments the way standard market policies are. This allows the E&S carriers to structure policies more narrowly, perhaps more in their own favor, often including provisions and exclusions not found in standard market policies.
Therefore, to avoid any misconceptions or gaps in coverage, every E&S policy must be viewed as unique. Each policy form must be thoroughly reviewed and understood by the agent and the insured. An overlooked exclusion in a policy can mean the difference between recovering from a catastrophic loss or going out of business. For example, knowing which carriers cover named storms in a particular geographic area, and which do not, can make the difference between a claim being paid, or denied.
It’s also important to check with rating bureaus like AM Best to compare the financial strength of the insurance carriers who underwrite the program. Whenever possible, work with an insurance advisor who has studied the cannabis insurance market, and who knows which programs have the best reputations, the most experience, the strongest insurance carriers, and which programs have a track record for paying claims in a fair and timely manner.
So, how can a business owner feel confident that their insurance program will be there for them when they need it the most?
Compare program designs, coverages, exclusions and carrier strength.
Don’t make your insurance purchasing decisions based on price alone. Remember, what good is saving a little money if what you buy doesn’t accomplish the purpose for which you bought it?
Finally, work with professionals who know the cannabis industry and who care about your success as much as they do their own.
Good luck!
