Cannabis legalization is quickly spreading through America, making it legal in 38 states apart from DC. However, you can only use cannabis medicinally and not recreationally in most states. Due to the high demand, many companies are selling cannabis and cannabis-derived products. Thus, the FDA has strict rules and regulations to ensure people only get high-quality cannabis and cannabis-derived products.
The FDA keeps a close eye on all cannabis-related products and asks companies for product recall if they find anything amiss. This situation negatively affects the company’s reputation and decreases sales. Therefore, you must protect your company’s assets by purchasing cannabis business insurance for product recall.
Why Do You Need Cannabis Recall Insurance?
As cannabis is a consumer product, the FDA department strictly regulates it. Cannabis-derived products can go bad because of their short shelf life, and in some cases can end up doing more harm than good. In such situations, the blame solely lies on the cannabis company, as it is their responsibility to safeguard their products.
Product recall can cause extreme financial loss because a whole batch of your products is returned rather than being sold for profit. If you find an issue in your supply chain, you have to call back your products, otherwise, consumers can take legal action against your company. When this occurs, all product manufacturing costs are lost.
To cover these financial losses, you must have cannabis product recall insurance. If you have not violated the insurance policies, the insurance company covers the cost of recalling your products. However, most cannabis insurance also covers the expenses related to the product recall process.
But some insurance companies also provide complete coverage of lost profits and brand rehabilitation. It is necessary to do brand rehabilitation after a product recall because even though calling back contaminated products is a good thing, it still damages your brand’s reputation.
Therefore, it is vital to take out an insurance plan for your cannabis company. But you have to make sure that your insurance plan provides complete coverage for your cannabis and cannabis-derived product recall.
3 Types Of Cannabis Insurance
Apart from cannabis recall insurance, there are multiple types of insurance available for cannabis companies. If you have all these insurance policies, your company is always financially protected from unknown incidents.
1. Cannabis Directors and Officers (D&O) Liability Insurance
Cannabis Directors and Officers (D&O) Liability Insurance is a vital insurance plan for private and public cannabis companies. This cannabis insurance program protects your cannabis company and its directors against any claims against your company for wrongdoing according to your company policy and FDA regulations.
When the FDA orders you to recall your product or you do so based on your own findings, it puts your company in the spotlight. You can attract multiple lawsuits from other companies, the government, customers, or your competitors at this vulnerable time. It is a high-risk insurance policy, and not all insurance companies offer it, so it is essential to find an insurer that covers your legal expenses if anyone raises a lawsuit against your company.
2. Cannabis Crop Insurance
After harvesting multiple batches of cannabis, you understand that tending cannabis crops can be risky. If your entire crop rots, you lose a massive amount of money. There are various reasons for cannabis crops to fail in outside conditions, and you may need to shift your batch inside to an indoor controlled environment.
Your cannabis crop insurance plan helps you retain funding to shift your cannabis crop indoors, regardless of the company’s size. While choosing the insurance policy, make sure to review it critically to determine whether the insurance policy covers both indoor and outdoor crop risks.
3. Cannabis Cargo Insurance
Cannabis is a fast-growing business, especially as it is quickly becoming legal in America. If you provide your services in different states or internationally, your one worry might be cannabis cargo. Harmful exposure during transportation can damage the crop, resulting in financial loss.
Cannabis cargo insurance policies cover the cost if your products or cannabis crop get damaged during transportation. This insurance plan should cover all the losses, whether it is due to vehicle failure or products deteriorating because of natural causes.
Insure Your Cannabis Company
The legalization of cannabis is rapidly taking over America. But as it is a consumer product, it can quickly degrade if stored in the wrong condition. When this occurs, the FDA issues a permit and asks you to recall your products which can result in damage to reputation as well as loss of profit.
To ensure that your company is protected by a comprehensive cannabis recall policy, reach out to the professionals at MFE Insurance today. Their expert team can ensure you have the coverage you need to protect against potential significant financial losses by creating an individualized policy for your company.