While the cannabis industry is swiftly becoming a booming business, it does not come without risk. Most companies turn to insurance to keep them protected from these risks. While insurance for legal cannabis remains in its early stages, there are now several major carriers that provide broad coverage with fair terms. Loss of income insurance is one such coverage option that helps cover the costs of bills and payroll in the event that your business is interrupted. Learn more about cannabis insurance, what it covers, and what could happen if you did not have a policy in place.
What Is Loss of Income Insurance?
Loss of income insurance provides coverages to businesses that lose income and incur certain expenses due to loss, damage, or other type of interruption in operations. To be eligible for coverage, the loss must be covered by your specific cannabis insurance policy. For example, physical damage must typically be caused by a covered peril, such as a fire, earthquake, or hurricane. In some instances, loss of income insurance will also cover the partial interruption of activities, such as in the case of a long-term injury of an employee causing a major loss of production.
If you are forced to close your cannabis business temporarily and possess covered property loss, loss of income coverage may help in a number of ways. First, loss of income insurance can replace lost net income ensuring that you are able to take care of both your personal and professional needs. Insurance may also continue paying for certain expenses, such as payroll, taxes, advertising, and your mortgage. Depending on your unique policy, loss of income insurance may also cover the cost of relocation expenses if you choose to temporarily setup shop at a different location.
What Does Loss of Income Insurance Entail?
You already know that loss of income coverage protects your company from a loss of income caused by a stop in business operations. However, do you know what business income actually entails? First, it includes your net income that you would have earned if the loss had never occurred. Your net income is your net loss or profit before any income taxes are subtracted. It also includes any continuing expenses. This includes any normal operating expenses that you will need to continue paying even after a loss, such as property taxes, rent, and essential utilities such as electricity.
In addition to basic loss of income coverage, there are a number of different options that could provide your cannabis business with additional coverage. Extra expense insurance is one such addition designed to cover any expenses that may exceed normal operating costs if your company is shut down temporarily. You may also choose to invest in dependent property coverage. This type of coverage provides earning assistance if your customers are unable to receive your goods or services, if your suppliers are unable to produce goods or services needed by your company, or if a company responsible for attracting customers to you goes out of business.
Also consider other add-on coverage options, such as utility services insurance. With this type of insurance, your business is protected in the event that there is a disruption to your company’s basic utilities provided by private or public utility companies, such as gas, electric, or water. If these utilities prevent your business from operating, you could experience a loss of income that may be covered by your cannabis insurance. You may also seek civil authority coverage. If your business is forced to close due to an act of civil authority like a disaster, the insurance company may provide income.
What are the Requirements for Coverage?
To be deemed eligible for loss of income coverage, you must meet certain qualifications. While these requirements can range from carrier to carrier, most lay out the same basic rules. First, your business must have suffered an income loss caused by a necessary suspension of your business operations. The loss must also consist of physical damage caused by a covered peril to the property. Next, you must schedule a business income limit where the loss took place. Finally, the suspension must occur during the period of restoration.
Why Do Businesses Need Loss of Income Insurance?
You never expect to experience a loss of income as a business owner, but when it happens you want to be well prepared. What if something happened to your cannabis dispensary business that made it temporarily unusable, such as a fire? While loss of income insurance cannot reverse the damage that occurred, it can help you recoup any income-related losses that you have suffered during the shutdown. Depending on your policy, loss of income insurance may cover your business under a wide range of events, such as damage from hail, windstorms, flooding, vandalism, and equipment damage.
Without loss of income insurance to provide the necessary coverage you need after a physical loss, you could face significant financial consequences. If disaster strikes and you do not have the money to cover your loss of income and expenses, you could lose your customers, your employees, and eventually your entire business. This not only affects your cannabis business, but also your personal life. Without income to keep you afloat, you may feel the extent of the loss at home as well.
Contact a Professional Cannabis Insurance Agency
As a responsible business owner, you want to do everything in your power to keep your company in good standing. One way to ensure that your company remains stable after experiencing a covered property loss is by adding loss of income insurance to your policy. With loss of income insurance, you can rest easy knowing that your income and important expenses are covered if your cannabis business should ever experience a physical loss or has a necessary cease in operations. For more information about how loss of income insurance could help your business or how you can acquire a cannabis insurance policy, contact a professional cannabis insurance agency today.