As businesses evolve, their insurance needs change significantly. Yet, many small companies fail to update their policies adequately, resulting in insufficient coverage when it matters most. In the cannabis and hemp industry, where regulations, risks, and liabilities can be more complex than traditional sectors, it's even more critical to ensure your business insurance is fit for purpose.
Many small businesses, particularly those starting in the CBD and wellness sectors, often begin with what's essentially market traders' insurance. This type of cover is typically designed for individual traders selling at fairs, farmers markets, or small pop-up stalls. It may cover stock, equipment, and public liability, but it offers minimal protection beyond that. For a business with no employees, operating solely at these types of events, this can be a cost-effective and sufficient option—at least at the beginning.
However, as businesses grow, so do their insurance needs. For instance, many companies transition from occasional market trading to selling online. This usually involves upgrading to an online shop insurance policy. While this might sound like a logical next step, it’s often still inadequate. Online shop insurance generally provides coverage for stock and customer claims, but it may not address the needs of a business that is expanding its premises, taking on employees, or scaling up production.
The problem arises when a business experiences rapid growth, but their insurance policy doesn’t keep pace. Let’s say you started your CBD or wellness brand from your spare room and gradually expanded to renting warehouse space, employing staff, and investing in specialised equipment. The moment your business outgrows its original structure—whether it's moving into larger premises, employing a team, or handling more sensitive data—you also outgrow the basic cover provided by an entry-level insurance policy.
Suddenly, when it’s time to renew your policy, you might be shocked to find that the premium has jumped by 1000% or more. The reasons for this can vary, but the increase generally reflects the added risks associated with having employees, larger premises, directors, more stock, and high-value equipment. But what’s even more alarming is that this significant price increase often comes as a surprise because many small business owners are unaware of the additional insurance coverage they now require.
For example, if you employ staff, you're legally obligated to have employer's liability insurance, which protects your business against compensation claims from employees who are injured or become ill as a result of their work. Similarly, if you own or rent business premises, you’ll need commercial property insurance to cover the building, stock, and equipment against damage or theft. Directors and Officers (D&O) insurance becomes essential if you have an executive team, as it protects them from personal liability for business decisions that might result in legal action.
Additionally, the cannabis and hemp sector presents unique challenges that many generic insurance policies don't account for. Your business might need to navigate complex regulations, ensure product liability for CBD or medicinal cannabis products, and even secure coverage for reputational damage, which can be particularly crucial in a highly regulated and often misunderstood industry.
So, what’s the solution? It’s essential to regularly review your business insurance policy to ensure it evolves alongside your company. This means not just renewing your existing policy but actively evaluating whether it still meets your business's growing needs. Look at your current and future risk profile—do you have employees now? Do you manage larger premises? Are you using expensive equipment or storing valuable stock? Are your directors protected from liability? All of these factors should inform the kind of insurance policy you opt for.
It may be tempting to stick with a cheaper, inadequate insurance policy, but this could leave your business vulnerable to major financial losses if the unexpected happens. An incident or claim that isn’t covered by your policy could have catastrophic consequences, putting your business and livelihood at risk.
For businesses in the cannabis and hemp sectors, it’s even more important to work with insurers who understand the industry’s unique risks. Make sure you're working with a provider that knows your sector and can offer specialised cover for your specific needs—whether that's product liability, crop failure, legal expenses, or even reputational damage.
In conclusion, as your business grows, so do your responsibilities and risks. Don’t wait until renewal time to discover that your insurance no longer covers what it should. Be proactive—review your policies regularly, understand what’s covered, and ensure your business insurance grows with your business. After all, peace of mind is priceless, especially in an industry as dynamic as cannabis and hemp.
By taking these steps, you can ensure that your insurance isn’t just a cost—it’s an investment in the future of your business.
Sian Phillips - Executive Director
Published 21/10/2024
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