About General Liability Insurance
All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A CANNABIS BEAUTY PRODUCTS BUSINESS
Example 1: Your customer purchases a CBD oil face moisturizer that was contaminated with a common allergen. General liability insurance will likely cover the costs of their medical bills.
Example 2: You ship a product to another state with strict cannabis laws and the package is intercepted by local officials. General liability insurance will likely cover the costs of a lawyer to prove that you’re operating within the letter of the law.
Example 3: An employee spills a bottle of oil on the floor and a customer slips and breaks their leg in the store. General liability insurance will likely cover the cost of their injuries.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
Cost of General Liability Insurance
On average, cannabis beauty products in America spend between $350 - $750 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner's policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
Other Types of Coverage cannabis beauty products Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all cannabis beauty products should obtain.
Commercial Property Insurance
Your property is the cornerstone for your business. If it’s damaged in any way, commercial property insurance will cover the costs of repair and restoration. It will also cover the contents of your property, meaning it may help you replace the furniture, office equipment, and appliances in your motel after a covered event.
Business Interruption Insurance
This insurance will cover your income in case your retail location needs to close for an extended period of time. If your building is severely damaged by a natural disaster or vandalism, business interruption insurance may compensate you for the average amount of income you would have made if your shop stayed open. If you operate your business in an old building or an area prone to poor weather, this insurance can be critical to keeping your business afloat if you need to close for several weeks at a time.
Product Liability Insurance
Product liability insurance provides additional protections in case you sell a defective cannabis beauty item. Because cannabis is not very well regulated, and often subject to scrutiny, this insurance is crucial to keeping a business protected from a variety of legal claims.
Workers' Compensation Insurance
This insurance protects your workers in case they’re injured on the premises. Whether it’s a one-time injury or a chronic condition, this insurance will cover the cost of their medical injuries.
Professional Liability Insurance
This form of insurance is a safeguard against any mistakes made by employees while on the job. For example, if an employee informs a guest that a product won’t aggravate their sensitive skin when it actually contains a relatively aggressive acid, professional liability insurance will cover the medical or legal costs that stem from the error.
Types of Coverage Some cannabis beauty products May Need
In addition to the policies outlined above, there are a few other types of coverage your cannibis beauty products business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Commercial Umbrella Liability Insurance
Commercial umbrella insurance is available to go above and beyond the limits of general liability. For example, if a general liability policy only covered legal costs up to $100,000, commercial umbrella insurance may increase that limit to $1 million. Due to the nature of cannabis, this form of insurance can be crucial to covering your store from all angles.
Data Breach Insurance
If you sell cannabis beauty products online, data breach insurance can help protect your website and your customers in case of a financial or data hack.
Additional Steps to Protect Your Business
Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
Frequently Asked Questions
What is included in a business owner’s policy?
A typical business owner's policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company's needs.
What is the difference between business insurance and general liability insurance?
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it's best to be proactive when it comes to protecting your assets. After all, you can't buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.