A critical aspect of the success of your cannabis dispensary is your inventory. The product gets to your business by being transported there often by a truck. A loss of product that was in transit is a risk to your ability to efficiently run your operation. The logistical supply chain found in the cannabis industry is very complex, with differing state regulations and requirements. Stock throughput insurance offers protection to dispensary owners from the variety of risks that start from when the product is created to when it reaches your customers.
A cannabis business is involved in a variety of activities that may include the import, export, assembly, manufacturing, or distribution of goods. If your business is associated with any of these events, a stock throughput insurance policy is recommended. Coverage includes facilities storage and cargo transportation for all types of goods. Limiting your exposure to these risks provides a continuous pathway for these products to reach your business.
What Is Stock Throughput Insurance?
A policy for stock throughput insurance provides comprehensive protection for products if they are damaged or a catastrophe occurs. It’s a form of marine coverage that’s intended to insure a company’s goods while it moves through the supply chain to reach its destination. Raw materials, works-in-progress, and finished goods are all protected with a stock throughput policy.
Delivering a product to the customer, especially one that contains cannabis, means that the product may undergo many forms during its life cycle, and it may be passed on several times beforehand.
For example, the cannabis edibles market has been steadily growing in popularity with expectations that it will grow to $4.1 billion by 2022. There are many types of cannabis edibles, including drinks, solid foods, tinctures, and powders. Certain products may have particular shipment needs depending on the form it’s in. While in transit to your dispensary, the product could be damaged due to a car accident or improper transportation, leading to the product being unusable by the time it reaches you. If either of these events were to occur, a stock throughput policy would cover the damages sustained.
What Does It Cover In The Cannabis Industry?
Coverage for a stock throughput policy protects goods and materials starting from the production all the way to its final destination. This typically extends to loss or damage that occurs to inventory. The policy is an “all-risk” coverage, meaning unless an item is explicitly excluded, all risks are covered within the terms of the insurance agreement. Raw materials, semi-processed goods, products being returned for repair, and manufactured products can all be included in a stock throughput policy.
Policies for cannabis stock throughput insurance vary by the insurance provider. Here is an example of what the coverage for a cannabis product could look like:
- Coverage begins when you have possession of the seeds
- Throughout the grow cycle
- While the raw product is in transit for processing
- While the product is processed at any location and while it is stored
- While it is shipped through any method to anywhere in the world, including transit hubs and distribution centers, and the product is received by the buyer
Do Cannabis Dispensaries Need Stock Throughput Insurance?
With the unprecedented rate of the cannabis industry growth, the case for obtaining stock throughput insurance is being made. Unfortunately, it is an underutilized and overlooked coverage that cannabis business owners don’t get until it’s too late. The exposure to risk that a policy protects your business from is too important to leave a gap.
Businesses that work in food and beverage, retail/wholesale, and raw goods industries will find these policies beneficial. Cannabis dispensaries are likely to participate in all of these industries. Most cannabis products are highly sensitive and fragile, which means that one small incident could result in a total loss of goods. The high value of cannabis goods will leave you with a huge financial loss that could have been avoided with adequate protection.
Benefits Of Acquiring A Policy
- Fixed dollar deductible. Stock throughput policies are not based on a percentage of your property’s value like a property policy.
- “All Risks” basis. Policies cover all but explicitly mentioned risks found in the insurance agreement.
- Combined coverage. Storing, processing, packaging, and transporting stock/inventory coverage are all combined in one coverage plan.
- Simplified claims processing. Make one call to handle your claim no matter where in the process the loss occurred.
Are There Any Exclusions?
The exclusions of a stock throughput policy differ by the insurer. It is common for the following items to be excluded:
- Willful misconduct
- Wear and tear
- Acts of terrorism
- Losses stemming from intentional acts
- Inventory shortages
Reach Out To A Professional Cannabis Insurance Agency
To further discuss stock throughput insurance with an experienced professional, contact MFE Insurance. We can provide you with more information about the benefits of obtaining a policy. MFE Insurance is an insurance broker that will find the policy to meet the needs of your business. Reach out today by phone at 213-266-7990. We look forward to hearing from you.