Finding Life Insurance with a Creative Cannabis Business
Marijuana industry collaborations (collabs) are popping up everywhere! Food, beverage, clothes – the list goes on and on. It seems like every company is jumping on this bandwagon of partnering with others to put out hyper-creative, fantastic products the bring out the best of both companies’ expertise.
The cannabis industry might be the champion of collabs. It seems like there is something new every time you go into a dispensary. It is not just new strains of flower or smoother vape cartridges, but things like cannabis cold-brew coffees, cannabis gum, cannabis craft soda, and half a million hard candy flavors.
Australia was one of the first to the cannabis collab game with CannaCo’s Myrcene Hemp Gin in late 2018.
But the insurance industry struggles to adapt. It’s easier to say ‘no’ to an unknown than to find yourself caught in disputes between federal and state regulations.
We will cover:
- Blocks to insuring cannabis businesses
- Common types of insurance for small businesses
- How you can avoid these headaches for collabs
- A strategy for getting you the right insurance
Even if they accept personal life insurance for recreational and medical marijuana, most companies still reject business applications.
There are a few who will consider covering business-related life insurance.
Blocks to Insuring Cannabis-Based Businesses
The major problem is the federal prohibition on cannabis versus state legality. It comes down more to the insurance companies’ fear of interstate commerce regulations – which is where the feds get you if they want to crack down on cannabis.
Any money-related industry tends to lean conservative. Insurers dislike change. Change makes it difficult to predict next quarter’s revenue.
It’s similar to the disclaimer on all investment projections. You always see that line saying, “Past performance does not indicate future gains.”
Finance-related industries depend on the ability to measure past performance to predict potential outcomes. Small legal changes regarding the money around the cannabis industry can irreparably skew entire blocks of business.
That’s why most companies are scared.
However, more and more companies issue life insurance to people who smoke recreationally and for medical reasons. It’s progress. The next challenge is working in the industry – everyone from growers to sales staff, to business owners.
Even with the hurdles, companies are starting to come around.
Common Types of Insurance for Small Businesses
The smart choices to cover a business depend on its goals and current structure. A sole-proprietor doesn’t need a buy-sell agreement, for example.
Key person covers someone who the business needs in order to function. It might be the business owner. It could be someone who would be near-impossible to replace. Key person life insurance pays the business if the insured person passes away. The company can use the money for anything. However, it’s typically intended to hire a replacement or figure out an alternative solution.
Buy-sell life insurance funds the transfer of ownership if a partner passes. Suppose two partners run a business. One passes, and the remaining partner finds themselves owning a business with their partner’s spouse – who may or may not know anything about the business. The buy-sell insurance, combined with a buy-sell agreement, pays out the beneficiary for their part of the company’s ownership. Buy-sell disability insurance also exists.
Collateral assignment covers business loans. Lenders don’t like risk. They’re fussy like that. Securing a business loan may require a collateral assignment of life insurance so that even if something horrible happens, the lender can still get some money back from their investment.
Disability insurance. Starting a business is absurdly difficult. Running a business is too. Running a business while going through chemo asks the impossible. Disability insurance (depending on the type) can cover either personal income or pay the firm to hire a temporary replacement.
Tax-free retirement. Who doesn’t like that sound of that? Some life insurance strategies allow you to accumulate such massive cash value in a safe manner that people use it to retire. It’s particularly helpful to business owners who have the income to fully fund the policy over 10 or 15 years, then never have to worry about premiums again. Even if something goes wrong in the future, you’ll always have that retirement income as long as you keep the policy in force.
But What About Collabs?
Cannabis-focused businesses such as dispensaries or farms are where insurers get fussy. But what about companies who do collaborations? Suppose you have a coffee roaster who wants to sell cold-brew cannabis bottles to dispensaries as one of its many products. Or perhaps a skincare business develops a line of lotions.
This is where a tricky situation gets stickier. It all boils down to the uncirculated underwriting guidelines each insurance company has at the moment. They change constantly.
The temptation from the business’ perspective is to conveniently forget about this particular product when filling out the application. That can lead to nonpayment of benefits for omitting information if not outright fraud.
Avoiding this headache as a business owner can be as simple as handing over the issue to an insurance agent who keeps up to date with the continually changing cannabis underwriting guidelines.
Chances are your agent will need to email the potential carriers anyway for individual consideration. They’ll know how to word the email to your advantage.
On doing your independent research, we recommend starting with the known marijuana-friendly companies. These insurers will issue personal life insurance policies for recreational and medical smokers. They are more likely to be amenable to business people.
Discuss your creative collab projects with your agent. Everything you tell them is confidential. The more they know, the better they can help you.
Particularly for collaborative product lines, cannabis makes for tricky business. Most companies will want to individually consider your business. The guidelines are always changing, so it’s easier for the companies to take every cannabis business on a case-by-case basis.
How Marcan Insurance Can Help
No matter how creative you get, we will figure out how to find you the right insurance. It’s our mission to keep tabs on the evolving underwriting guidelines.
We’ve helped cannabis business owners find the right policies to protect their business at the most affordable rates. Give us a call today with any questions at 888-987-8447. We’re happy to help, and there is never any obligation to move forward.