Tobacco Store

What You Need to Know About Tobacco Store Insurance

Despite the fact that fewer Americans are smoking today than 10 years ago, tobacco stores still fill a high-demand market. Some retailers have begun adding e-cigarettes to their inventory due to the large number of people who are giving up smoking in favor of vaping. Some also deal in expensive and rare cigars. Whatever the case, if you own a smoke shop, you will have a large number of exposures that can only be covered through a suitably built tobacco store insurance portfolio.

2014 Tobacco Industry Facts From Statista.com

There are more than 7,500 tobacco shops operating in the United States.

  • Approximately 17.8% of adults in the U.S. smoke cigarettes.
  • This is down from approximately 25% in 2005.
  • U.S. smokers consume approximately 280 billion cigarettes each year.

What Could Go Wrong at a Tobacco Shop?

Many tobacco stores are more than just retail establishments; they are a place where people frequently linger to enjoy social discourse over cigars or cigarettes. Any time customers spend a lot of time in your retail space, it increases your liability exposure because they are more likely to get hurt or suffer property damage while in your store. Furthermore, because many tobacco stores carry flammables, such as butane lighter refills, and some still permit smoking in their retail spaces, the risk of fire damage is much greater than in most other retail establishments.

Finally, because tobacco products are known to be hazardous to users’ health, your store always runs the risk of being named in a liability lawsuit. For this reason, some commercial insurance providers may shy away from insuring tobacco stores. Still, there are a number of insurers that offer this coverage. It is best, when creating your portfolio, to have a knowledgeable insurance agent who can answer your questions and explain your various coverage options.

Protect Your Tobacco Shop With Sufficient Property Coverage

If you permit smoking inside your tobacco shop, you face a significant risk of fire damage. Your store is also at risk for property damage caused by storms, vandalism and other hazards. If your business property is lost or damaged, you will need to rely on your property insurance.

  • Building insurance: If you own the building in which your tobacco shop is located, you will be required by your mortgage lender to carry building insurance. This compensates your business if a covered event causes damage to the structure of your building.
  • Contents insurance: This covers everything you keep within your tobacco store premises including merchandise, shelving, cash registers and décor. You will want to ensure that you have sufficient coverage for all of your business property.
  • Flood insurance: Your commercial insurance policy will not include coverage for damage caused by floods. To obtain this additional protection, you will need to supplement your policy portfolio with a flood insurance policy through the National Flood Insurance Program (NFIP).
  • Backup of sewers and drains insurance: Not all water damage is caused by flooding. If your tobacco store is located below ground, you may want to consider this coverage, which will compensate you for water damage if the sewage system overflows and causes damage to your store and property.

Tobacco Shop Liability Insurance Is Very Important

A single liability lawsuit has the potential to cause your business financial hardship or even the need to file for bankruptcy. Liability insurance protects you from this risk by providing coverage for court costs, legal defense fees and financial damages. There are a number of different liability insurance coverage types available to you as you build your commercial insurance portfolio. Some that may be of interest to you include the following:

  • Premises liability insurance: Part of your general liability coverage, this protects your business against general lawsuits, such as if a customer is injured or experiences personal property damage while in your store due to negligence on your part. While it covers a wide range of liability lawsuits, it does not cover everything, so supplemental liability coverage, such as those listed below, may be necessary.
  • Product liability insurance: If a customer is sickened or injured by a product you sell, you will need this coverage to protect your store’s finances. In a recent case in California, a woman was burned when an e-cigarette case exploded while charging. The courts ruled that every business in the line of distribution, including the store where she bought the e-cigarette, could be held liable. Because you are dealing in merchandise that is known to cause illness, this coverage is very important but may also be very expensive.
  • Fire legal liability: Most smoke shops operate out of leased spaces. If your business rents its retail space and you allow smoking in your store or carry a large supply of flammable items, your landlord may require you to carry this extra liability insurance, which covers damage to the landlord’s property if it is damaged by a fire that originates in your store.

What Other Smoke Shop Insurance Should You Consider?

In addition to the property and liability coverage mentioned above, there are other insurance coverage types that may be required or are at least worth considering for your tobacco store. These include the following:

  • Business income insurance: If a covered event forces you to temporarily halt operations while repairs are made, this insurance will provide your tobacco store with up to one year of continued income while you prepare to reopen.
  • Workers' compensation insurance: Required in most states, this covers the cost of necessary medical treatment for injuries sustained by employees while they are working at your tobacco store.
  • Employment practices liability insurance: This insurance provides your tobacco store with coverage in the event that an employee sues you for an illegal business practice, such as wrongful termination or discrimination.

Every business has its own unique needs, so there may be other coverage types that are right for your tobacco shop. Your independent insurance agent can look for gaps is your coverage and suggest appropriate coverage to limit your exposures.

Get Help Building a Strong Tobacco Shop Insurance Portfolio

Purchasing business insurance for your tobacco shop can be a difficult and complex process. Allow an independent agent in the Trusted Choice® network to help. These agents can work with you to identify your exposures and can then shop around for suitable policies to meet your coverage needs. Find a Trusted Choice agent near you to learn more and start comparing quotes for tobacco shop insurance.


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