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Insuring a Cannabis Dispensary: Cost and Coverage

30 March 2022 / Category: Blog
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While there isn’t a cannabis insurance policy, there are intricacies to insuring a business in the cannabis industry that not all agents understand. The cannabis industry is considered risky to cover for insurance companies and using an inexperienced agent can bring the cost of coverage up. With a number of factors going into the cost of insuring a cannabis dispensary, working with an experienced agent is key.

What Impacts the Cost of Dispensary Insurance?

1. Dispensary Size

Dispensary size can influence the cost of your business insurance. Larger dispensaries often offer a broader array of products which can lead to higher premiums compared to small operations. The more products that are offed, the riskier it is for the company to insure it. This is why it is important to have your agent shop around for you, as this can also differ between companies.

2. Policy Limits

It is important to consider your policy limits before you complete your insurance program shopping. Higher limits generally come with higher premiums, but it is not unheard of for claims to reach or even surpass those limits. If you are worried about this issue, it is also possible to purchase excess liability to kick in coverage when your policies are not sufficient.

3. Physical Location

Insurance rates are different among various states, but you may also see some different in premiums between urban and rural areas. If you are still considering where to set up shop, you may want to ask your Cannabis Insurance Professional to quote out possible locations for you to see if they differ enough to influence your decision.

4. Requested and Required Coverage

One of the largest factors when determining cost will be what products you need. Many marijuana businesses start their insurance shopping by asking how much insurance they need, when really you should be asking yourself how much you can afford. Insurance exists to protect you and your business from financial devastation. Some policies are required by your state, others are widely accepted as necessary, and the last few are there to provide protection for the unknown. All the below policies, and more, are meant to be a part of your risk management plan.

Cannabis Insurance Types

General Liability Insurance

General Liability is an essential piece of creating an insurance plan for your business. General Liability covers claims involving bodily injuries and property damage linked to your product, service, or operations. In the cannabis industry, this could mean covering:

  • Medical bills after a client ingests a toxin linked to your buds,
  • Legal fees if sued for defamation by a competitor,
  • Repair costs after smoke damage to a neighbor’s property after a fire.

Commercial Property Insurance

Commercial Property is meant to protect your business-owned property after damage incurred from a covered event. Covered events are often theft, vandalism, fire, hail, and several others. You should check your policy or chat with your agent to be completely sure what is covered under your policy. Depending on the size of your operation, you may be able to bundle your Commercial Property coverage within a Business Owners Policy (BOP).

Errors and Omissions Insurance

Errors and Omissions (E&O) is often also referred to as Professional Liability. This coverage would kick in to cover your defense after a third party claims financial loss because of your business’ mistake. E&O will typically cover attorney’s fees, court fees and settlements. Medical marijuana dispensaries can be at a higher risk than others for claims of this nature as it is being prescribed with a medical purpose. There can be implications if the product does not perform as intended.

Commercial Crime Insurance

Commercial Crime Insurance can protect your business from business-related crime such as theft by employees, forgery, robbery, and electronic crime. Commercial Crime policies are often written with “named perils,” meaning that the loss must fall within the categories specified in the policy. It is always best to review your policy.

Workers’ Compensation Insurance

It is important to look to your state’s requirements on Worker’s Compensation to be sure that you are complying with state regulations. Workers’ Comp policies will typically cover medical bills and replacement wages for an injured employee. There are also provisions that may allow a death benefit to be paid to their families.

Injuries and illnesses often covered by workers’ comp include:

  • Sudden traumatic injury, such as those suffered in an explosion at your edible manufacturing facility.
  • Repetitive stress injury, such as back strain caused by long hours harvesting crops.
  • Occupational illness, such as lung disease suffered by employees in a testing lab.

Inland Marine Insurance

Because Commercial Property Insurance is only meant to cover business property when it is at a specified location, any time you have product in transport you would need a different policy to provide coverage. Inland Marine Insurance covers products, materials and equipment when transported or while warehoused by a third-party.

Commercial Auto Insurance

Personal Auto policies often will exclude business use. It is vital to consider the types of vehicles used in your business, even if the vehicle is not owned by you. There are various ways in which a commercial vehicle can be covered, one of which is Hired & Non-Owned Auto. This would provide coverage for damage to or caused by vehicles that are hired, leased, or borrowed by your business.

There are many factors involved when insuring your cannabis dispensary. This is why we here at Cover Cannabis believe it is best to discuss your unique operation with a Cannabis Insurance Professional. With years of experience, we are ready to find the coverage that best fits your business and your budget. Call us today to chat about your insurance needs!

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