Get a quote on Business Insurance
Owning and running a tobacco store or vape shop comes with complex risks and insurance needs. The continued popularity of cigarettes, e-cigarettes, vapes, and cigars means heavy foot traffic, resulting in high exposure to third-party injury and theft. It is vital to assess these potential risks so that you can ensure your insurance policies fully protect your business.
What insurance coverage do I need for my tobacco or vape shop?
Although there are several types of insurance coverages to consider, the following policies are particularly relevant for tobacco and vape businesses:
General Liability Insurance
General liability insurance covers claims of accidental third-party bodily injury and property damage. This is a key coverage for tobacco and vape shops due to the high customer traffic within your business premises. You could be held liable if customers accidentally injure themselves on your property.
Additionally, general liability insurance covers third-party bodily injury or property damage resulting from your shop’s products. This is particularly important for tobacco and vape shops because of the potentially dangerous items sold in your shop, including lighters, electronic smoking devices, and nicotine-infused liquid. A malfunctioning product could cause serious injury to your customers and it puts you at risk for a massive lawsuit.
General liability insurance also covers personal injuries, which can include invasion of privacy, false detention or arrest, discrimination, and wrongful ejection. These types of claims are common when business owners deal with suspected shoplifters.
Examples:
- Bodily injury: One of your customers trips over uneven flooring in your tobacco shop and sprains his wrist. Your general liability insurance would cover the injured customer’s medical expenses and any legal fees if he decides to sue your business.
- Product liability: Your tobacco and vape shop sold a batch of defective disposable lighters to a customer. Lighter fluid leaked into his pocket, and he received massive burns when he stood too close to his fireplace. Your general liability insurance would cover his medical costs and the legal fees to defend your business.
- Personal injury: You suspect someone in your smoke shop of shoplifting. You confront the shopper and forcefully hold him in your back office until you’ve been able to contact the police. The police arrive and find the shopper innocent after reviewing your security footage. The shopper sues your business for false arrest and discrimination. General liability insurance would provide coverage for the lawsuit.
Workers’ Compensation Insurance
Workers’ compensation insurance provides financial and medical benefits to employees who suffer work-related illnesses or injuries during the course of their work. This coverage includes the employee’s medical expenses, rehabilitation, and a portion of lost wages. Additionally, workers’ compensation insurance can provide funeral, burial, and death benefits for the employee’s surviving family in the case of a work-related death.
In the retail environment, accidents can happen. In addition to common workplace accidents like slip-and-fall incidents, your employees can risk injury from handling flammable products and toxic chemicals. Workers’ comp can provide coverage if an employee is injured and unable to work while recovering.
Depending on your state, you may find differences in workers’ comp regulations, including the types of illnesses and injuries that are covered, specific benefits available for employees, the types of medical examinations required to verify claims, and protocols for delivery of medical care. Make sure you’re up-to-date with local employment laws, as penalties for violations can be severe.
Example:
- Your business allows smoking on the premises and a customer accidentally starts a small fire when he improperly disposes of his cigarette. Your employee sustains second-degree burns on his hand when he puts out the fire. Your insurer will provide funds for his medical treatment and a portion of his lost income if he is unable to work during recovery.
Commercial Property Insurance
Commercial property insurance provides financial protection for your business property, including buildings, equipment, furniture, and inventory. The products sold at your tobacco and vape store are often highly flammable. If your business allows smoking on the premises, the likelihood of an incident and the risk of your property catching fire is high.
Commercial property insurance is essential for businesses that heavily depend on their commercial space or merchandise. A property policy can help you recover faster from disaster, providing funds to repair or replace property that is damaged or destroyed by a covered peril, such as fire, windstorm, hail, vandalism, and explosion.
Example:
- Due to faulty wiring, an electrical fire breaks out in your tobacco store. Your flammable products quickly catch on fire and further spread the flames. The fire causes significant structural damage to your building and destroys a large portion of your inventory. Your insurer would pay to replace your inventory and repair your building.
Commercial Crime Insurance
Commercial crime insurance provides your business with financial protection from losses due to crimes such as theft, burglary, robbery, forgery, and fraud. While commercial property insurance offers some protection from crimes committed by third parties, coverage is limited and does not provide financial protection from crimes committed by your own employees.
This is vital because monetary transactions between your customers and your employees increase the likelihood of employee dishonesty. In the event of theft, robbery, forgery, or fraud, your commercial crime policy would provide your business with financial reimbursement for the losses.
Example:
- A robber threatens your employee with a knife in order to steal expensive vape equipment and money from your cash register. The financial losses caused by this robbery would be covered by your commercial crime insurance.
Business Income Insurance
Business income insurance (also known as business interruption insurance) is a form of coverage that can be added to your commercial property insurance. In the event that your business must temporarily close to recover from physical loss, damage, or destruction by a covered peril, business income insurance can provide coverage for loss of income and operating expenses, such as the business’s net profits and normal operating expenses (rent, employee salaries, and taxes).
For tobacco and vape shops that would not be able to operate without their commercial spaces, business income is crucial. Many retail businesses rely on just a few peak shopping seasons to bring in the majority of their annual revenue, meaning any closure during those times could mean financial peril without appropriate coverage.
Example:
- A heavy rainstorm damages the roof of your building, forcing you to temporarily close your tobacco store while your roof is repaired. Business interruption coverage would pay for your rent and other expenses until you are able to reopen.
Additional Coverages
- Hired and non-owned auto insurance is important if your business rents or uses personal vehicles for business purposes. For instance, this coverage is essential if your employees often run errands using their own cars. If an employee is involved in an auto accident with a rented or personal vehicle, this coverage would provide financial protection for third-party bodily injury and property damage, as well as any legal costs to defend your business.
- Cyber liability insurance can cover financial losses that result from cyber events such as data breaches, hacking, viruses, denial of service attacks, and more. This is an important consideration for your tobacco and vape store since you likely engage in credit card transactions. If your business also operates an online or mobile web store, cyber coverage is crucial in protecting your customers’ personal information and financial data.
- Inland marine insurance covers movable property, and for tobacco and vape shops, this coverage can be helpful if you transport merchandise between stores or from a warehouse. If your merchandise is damaged in transit, inland marine insurance can provide coverage.
Pricing and Quotes
Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:
- Business size
- Industry
- Location
- Number of employees
- Claims history
Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a vape shop with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.
In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for tobacco and vape businesses:
| Provider | General Liability | Professional Liability | Business Owner's Policy |
|---|---|---|---|
| Embroker | ?? | ?? | ?? |
| CoverageSmith | ?? | ?? | ?? |
| CoverWallet | ?? | ?? | ?? |
| Hiscox | ?? | ?? | ?? |
| Thimble | ?? | ?? | ?? |
Final Word
Tobacco and vape shops are open to a number of unique risks. It’s important to obtain appropriate business insurance in the event of incidents or lawsuits that you may face during the course of doing business. From fires to customer injuries, business insurance can allow you to rest assured that your business will be financially protected and able to endure unanticipated disasters.
