CBD Insurance: It’s Available, But It’s Scarce
If you own a CBD business in Texas, we offer one of the few policies available for product liability for companies who market cannabidiol (CBD) products.
Are you one of the pioneer companies with a CBD business in Texas? You will need product liability insurance to protect you and your customers. We can help you with Texas CBD insurance and Texas CBD general liability insurance.
Today, CBD insurance is neither widely available nor inexpensive.
First, you need to consider the insurability of CBD from the insurance company’s perspective.
Traditionally, insurers have not offered insurance for activities that they perceive are illegal. The thinking being this would be against public policy. Currently, the regulatory bodies that have authority over CBD are too numerous to mention, so the “legality” of CBD is still under a dark cloud, and this by itself scares many insurers.
A related issue is the direct-to-consumer sales of CBD products on the Internet. Their concern is that if a product is sold to a consumer in a state where there has been no favorable cannabis legislation enacted (e.g., medical, legal), and they insure it, have they insured an illegal act?
Remember, these insurance companies are by-and-large public companies, and the last thing they want is a regulatory action against them for insuring illegal activities.
Availability of CBD Liability Insurance
The availability of liability insurance has actually shrunk the past few years. There are only a handful who will insure CBD companies. And they generally are not going to be “household name” insurers like Hartford, Travelers, Geico, Nationwide, State Farm or Farmers to do it.Austin Insurance Group deals with one carrier that is openly and actively underwriting CBD risks in Texas. The cost starts at about $6,500 for a $2 million liability policy. That’s usually the absolute minimum premium that smaller companies will pay. Larger companies can expect to pay more. NOTE: This is approximately twice what a startup dietary supplement company would pay for a similar policy.
3) You may end up with sticker shock at the cost of the insurance.
The Minimum Premium Concept
The small handful of carriers offering liability insurance to CBD companies are called “excess and surplus lines” insurers. Which means you may not have heard of them, but they are usually subsidiaries of larger insurance conglomerates.These conglomerates set up subsidiary companies to underwrite specialty lines, often that sell or make products that have a track record of injuring people and causing insurance claims. Actually, it is a blessing that these excess and surplus lines companies are allowed to exist, because without them, industries like ladder manufacturers, snowboard or skateboard manufacturers, football helmets suppliers, dietary supplements, and CBD companies might not be able to get insurance at all.
These carriers have minimum premiums, which are defined as the absolute minimum cost a single policyholder will pay. The majority of these carriers have anywhere from a low-to-high five-figure minimum premium, which makes them unviable for a company projecting sales of about a million dollars or less.
But “today” is relative term. A few years ago, for a standard $2 million liability policy, the lowest minimum premium was about $10,000. Today, it is hovering around $3,000 to $6000, which is quite an improvement, but still a big bite for a company seeking to conserve cash.