Cannabis dispensaries operate in a volatile business environment. With shifting legal standards and many banks and insurers still unwilling to partner with businesses that sell cannabis products, securing your finances can be a struggle. Many owners opt for only the most fundamental forms of cannabis insurance, such as general liability and property coverage. However, one of the most commonly overlooked policies is product recall insurance.
Dispensaries should always carefully curate their products to keep customers safe and happy. However, mistakes happen, and when they do, your business could experience financial fallout if you do not carry the proper insurance. Here is everything you should know about product recall insurance and how it can help keep your cannabis dispensary safe from unexpected financial challenges.
What is Product Recall Insurance?
When a dispensary stocks products from other businesses, it is responsible for making sure that what it sells is safe for its customers. Sometimes, a cannabis product is deemed unsafe or unfit for consumption; this may occur because a batch was found to be contaminated, its lab testing revealed that it was not accurately labeled, or something else.
This means the dispensary needs to pull those products from its shelves. Doing so can have significant financial and reputational implications for the business, which may cause difficulties. Product recall insurance helps to ease the financial ramifications of recalls and, sometimes, even assists with mitigating the economic consequences of reputational harm.
Why Do Dispensaries Need Recall Protection?
A product recall can have more of an effect on your dispensary than you might imagine. Cannabis businesses need strong recall insurance because:
Liability is Not Enough
If you have a general liability policy, you may assume it will cover you in case someone is harmed due to engaging with your business. While the details of general liability insurance can vary (and may include some assistance on this front), product recalls come with more significant harm than just the customer angle.
The main challenge is getting coverage in the first place. If you review your insurance policies carefully, you will likely find that recalls are one of the specific areas typically excluded from other types of liability insurance. You usually need a specific policy to protect yourself from this risk.
Cannabis is an Innovative Industry
Product recall insurance is increasingly valuable in the cannabis business, more than in many other industries. For example, the constant changes in weed products, such as new cannabinoids that lead to new product varieties, can mean a higher incidence of recalls. With innovation comes risk, and consumer risk may not be noted until well after stocking your shelves.
Customers Value the Preparedness
Businesses must consider their public image when considering product recalls. Your customers may not feel that you are trustworthy if you have no demonstrable way to protect them in the event of a recall. However, being able to show product recall insurance indicates that you are ready to withdraw any products that might cause them harm, boosting your brand image.
The Consequences Can Be Catastrophic
One of the most significant reasons cannabis dispensaries should consider product recall insurance is that the financial ramifications of a coverage gap could be substantial. The cost of purchasing the product, extra labor to remove it, proper disposal, replacement, and even business or sales interruption caused by selling it may all amount to a significant financial burden.
Product recall insurance can assist with the economic aspect of this challenging time. However, it is essential to read the details of any insurance policy to understand what may be excluded and how to file a claim. For example, you may need to demonstrate proper disposal procedures to comply with local requirements for recalls, which will then need to be submitted alongside your claim. If you are unsure how to protect your business against recalls, talk to the professionals! They can help you understand whether you need a separate recall policy or simply an addition to your general or business liability coverage.
Get Product Recall Insurance You Can Trust
A product recall can be devastating to a business’s bottom line, but protecting customers throughout this challenging time is essential, even if the results are costly. The good news is that product recall insurance can soften the blow by helping to recover the costs of the product and its disposal, so your business can continue to flourish. Contact MFE Insurance to learn more about product recall insurance, protection for your cannabis business, and how to make it all fit together. Our team can create a personalized blend of insurance coverage to help your company succeed.