Over the last few years, the once high prices for general liability insurance—including product liability—have started to drop for professionals that sell dietary supplements and cannabidiol-infused (CBD) products.
While the potential for savings might seem like good news, it’s important to remember that cost is only one of many deciding factors in selecting the right product liability insurance broker for your business.
There are a couple of things to highlight and keep in mind when you’re looking for this coverage.
First, businesses should consider the limits of insurance that are or may be required. Often times, a company is able to satisfy their vendors and customers with a standard $1 million per occurrence/$2 million aggregate limit policy.
During the period where insurance costs were much higher, big retailers began to revise their “vendor insurance requirements” to consist of higher limits. Along with raising the requirements, they also grew to be more thorough when it comes to tracking certificates of insurance from suppliers as well as ensuring compliance.
The limits of liability can be driven by these factors and should be selected carefully during the quoting process.
Additionally, take a close look at the coverage itself. Each general liability policy (including product liability) will have an ingredient exclusion list attached to it and each insurance company has a different list of ingredients. This exclusion list will apply to both single ingredients as well as finished products that contain one (or more) of the excluded ingredients.
Each exclusion list will be different from insurance company to insurance company and they are always evolving.
As seen in recent years, these lists are not getting any shorter. For example, nearly all of the insurance companies for dietary supplement companies have now added CBD—or hemp—to the exclusion list (which is its own separate topic for discussion).
It is strongly advised that the exclusion list attached to your company’s policy is truly maximizing the coverage for the products being sold.
How should a dietary supplement or CBD company purchase a liability policy and be confident they have the proper limits of insurance, coverage and cost?
Many times, we get approached by businesses that think “the more brokers, the better”—with the thought that competition will bring in the lowest price. Be aware that purchasing liability insurance for a company in the dietary supplement and CBD business is not the same as buying insurance for a local flower shop or family restaurant.
There is a gamut of insurance companies starving to insure those types of businesses, but there are only a handful of underwriters willing to insure dietary supplement and CBD companies. Due to the small availability of insurers, a supplement company should be careful when selecting who will represent their company in the most favorable manner.
It is important to know that the insurance carrier is only able to provide one quote and that quote often goes to the first broker to contact them. So the mindset of working with another broker hoping they can get “better pricing” from the carrier is not accurate.
The right insurance broker will be able to get quotes from all of the available insurance companies, however, they will focus on providing the most appropriate plan for your business and products.
A knowledgeable and experienced insurance broker within the industry can be a very valuable asset to your business—and the selection process is important. Knowing the insurance side of things is crucial, however, finding a specialist that knows your industry can help alleviate a lot of guesswork and pain.
It is true that not every broker truly understands the Dietary Supplement and CBD industries. There are those who simply put a policy in place and assume there is ample coverage should a claim occur.
And then there are the few who can not only help get you a liability policy, but also educate you on why it is the most appropriate policy (price and coverage), understand your product and business and better prepare you for the future.
Like any healthy regiment, striking the right balance will require a bit of homework, commitment and a strong focus on your goals—and it’s certainly worth the effort.
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