Cannabis businesses continue to knit themselves more comfortably into the fabric of modern shopping, but they are still far from receiving the same benefits and opportunities as longer-standing niches. When securing cannabis insurance, many weed-focused businesses opt for general liability coverage because it provides an overarching level of protection: it can shield the company from the financial ramifications of specific customer complaints. However, general liability alone is not enough for your cannabis business.
Many business owners assume that general liability insurance offers much more protection than it does, even when investing in a high-quality, broad scope policy. To keep your cannabis company secure, it is essential to choose not just general liability coverage but also other types of insurance as well. Why? To round out your protection and, perhaps most importantly, to address the particular requirements of your local regulation.
Essential Takeaways
- Cannabis businesses have exclusive challenges in securing insurance coverage because the industry is relatively new and because many insurers will exclude companies that are associated with marijuana.
- General liability insurance alone is not enough; at the very least, companies should consider product liability and crime insurance.
- Other applicable policies include E&O, commercial property, and business interruption.
- Policy requirements differ depending on the location of the business, so always check local rules.
Why General Liability Insurance Alone Isn’t Enough
General liability insurance covers financial issues arising from when your business causes harm or property damage to a third party. However, that is not always true with cannabis companies. In fact, many insurance providers specifically exclude weed businesses from being covered at all!
It may also exclude certain types of claims, such as those involving health hazards. Thus, cannabis businesses may find thorough coverage difficult, as the most common claims such companies experience include patients seeking medical attention due to the effects of marijuana sold at the business or possible contamination (e.g., mold).
The Top Insurance Policies Cannabis Businesses Are Missing
Yes, some general liability insurance policies can cover cannabis businesses; however, achieving this requires working with an industry professional. However, even great GL coverage should be supplemented by other policies. Often, the most useful are:
- Product liability insurance – Specifically covers the effects of the products themselves, e.g., if flower or edibles sold at the business cause an adverse reaction
- Crime/theft insurance – Cannabis businesses are at higher risk of break-ins and other crimes because most cannabis is still purchased in cash, leaving the business with substantial cash on hand. General liability policies may provide insufficient protection or even no coverage for such risks.
- Commercial property insurance – Protection against damage to the business structure itself, e.g., from fires or vandalism. Depending on the policy, this may include both the building and any products stored there, provided they are correctly stored.
- Business interruption insurance – Should an event such as a fire or vandalism force the business to shut down, this type of insurance temporarily helps cover costs until it reopens, which is essential for cannabis entities with narrow profit margins.
- Errors & omissions insurance – Dispensaries that utilize the services of budtenders to provide consumer advice benefit from E&O protection, which addresses the financial consequences should a customer come to harm due to negligent or incorrect information provided by staff.
Cannabis-Specific Insurance Risks: Localized Changes
The cannabis industry has insurance challenges specific to the niche. Many insurers will exclude any company that handles weed from securing a policy. Others may refuse to work with businesses that operate primarily in cash, and many cannabis companies do because not all payment providers allow payments for marijuana products.
However, one of the most significant hurdles when considering cannabis business insurance, general liability or otherwise, is location. Laws and requirements regarding cannabis are both federal and state issues, so your business’s jurisdiction may place additional rules on how your business operates or is insured.
For example, some states require that a cannabis business secure a general liability policy with a specific minimum per-occurrence amount, while others specify that product liability is also required. Still others may be even stricter, e.g., requiring the company to store its product in specific ways for its product liability protection to be valid.
Get the Right Insurance for Your Cannabis Operation
Whether you are a brand-new dispensary opening your doors for the first time (congratulations!) or a long-standing member of your community, make sure to carefully consider which types of insurance are protecting your business carefully. They may not be as effective as you believe them to be. Contact MFE Insurance to get personalized guidance on the protection that would benefit your company the most, as well as which insurance coverages are mandatory based on your situation. We can help you secure custom insurance protection so you can operate with confidence.