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Dispensary Insurance: Finding the Right Coverage

30 March 2020 / Category: Blog
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With marijuana being legalized for both medical and recreational use in a majority of states, the cannabis industry continues to gain momentum as one of the fastest growing markets in the county. New cannabis dispensaries are being established quickly and, in most cases, these new dispensaries are run by first time cannabis business owners, who may not be aware of the risks that come with running the business.

As a cannabis dispensary business owner, you are at risk of a variety of lawsuits including legal actions based on presence of pesticide residues in products, inadequate warning labels, and unsafe handling practices during the manufacturing process, among others.

Cannabis Insurance is Rapidly Evolving

Today’s ever-changing laws and the explosion of cannabis-related businesses in recent years, have open the door for new insurance products to emerge, catering to the different and unique needs of cannabis business owners. Some of the basic coverages a cannabis dispensary would need, would be the following:

General Liability Coverage for Dispensaries

It is likely that local state laws will require you to provide proof of general liability coverage, in order for you to get the necessary license to open and operate a dispensary.

General liability insurance can help cover medical expenses and attorney’s fees resulting from bodily injuries and property damage resulting from your products, services or operations. It may also cover you if you are held liable for damages to your rented property.

General liability will usually be required by your landlord or building owner as a pre-requisite to sign a lease. Even before you open your doors, while you are renovating, organizing and getting your dispensary up and running, general liability will be a requirement.  

General liability insurance does not cover workmanship, auto accidents, employee injuries, punitive damages (in most states), intentional acts or professional mistakes.

Why Product Liability Insurance is Important for Dispensaries?

While most business owners understand the need for liability insurance, most do not have a good understanding of the importance of product liability insurance for dispensaries.

In the case that a product is defective, tainted or you as the seller have failed to provide adequate warnings or instructions, you can be held financially responsible for any negative consequences. A product liability insurance policy can cover your legal defense costs, such as court and attorney’s fees, as well as payouts to an injured party.

It important to note that even if you do not grow or manufacture the products you sell, anyone who is involved in bringing a product to market can be sued.

What Other Dispensary Insurance Would You Need?

In addition to basic property and liability insurance, here are some additional coverages you can look into to further protect your cannabis dispensary.

  1. Property coverage including coverage for your building, contents, inventory and finished stock
  2. Workers Compensation
  3. Business Interruption and Business Income
  4. Equipment Breakdown and Spoilage
  5. Commercial Umbrella
  6. Employment Practices Liability
  7. Crime Coverage
  8. Cyber Liability
  9. Directors and Officers Coverage

How Much Does Dispensary Insurance Cost?

Each dispensary business has different insurance needs. Hence, costs will vary. What you will pay for your dispensary insurance depends on your individual risk factors, such as:

  1. Ownership of your place of business
  2. Value of your inventory
  3. Location of your business
  4. Number of employees
  5. Fire, weather and crime risk for your business and neighborhood
  6. Types of products that you sell and the risk associated with them

Commercial Auto Insurance

While some dispensaries have company owned delivery vehicles or fleets, many dispensaries have their employees use their own vehicles for delivery. Here you have to be careful, as any accidents that occur while employees are on the clock, will not be covered by their personal auto insurance. You also run the risk of getting sued if there is an accident, personal injury attorneys are often searching for these types of cases, and these types of cases can be very expensive.

Non-owned auto coverage is now available, which can cover your business in the event of a lawsuit because of an employee accident involving their own vehicle. Limits are usually as high as $1 million and can be higher if needed.

How Can we Help?

Our team is comprised of seasoned insurance professionals with experience in the cannabis industry. Each and every agent is handpicked for their specific expertise and trained in the proprietary practices that are the hallmark of our success. Our employees’ endeavor, each and every day, is to exceed expectations, every time.

Let one of our agents help you search for policies that will cover your unique needs and is well within your budget.


This article is intended for informational purposes only and is not for legal or business advice. Cover Cannabis nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact us for more information.