The global cannabis industry is growing exponentially and is expected to reach $146.4 billion by 2025. Despite the growth, this emerging sector faces several risks and challenges.
As the cannabis industry expands and becomes increasingly regulated, so does the risk exposure – a significant reason why insurance companies hesitate to enter the sector. Many marijuana businesses find it hard to get exact quotes and get left with sub-standard insurance with major loopholes.
Cannabis dispensaries and producers need secure, valid insurance that complies with California regulations to manage risks and claims. Learn more about why it’s vital for marijuana companies to have insurance, basic requirements, coverage gaps, and much more.
Why Is Cannabis Insurance Important For Marijuana Companies?
Believe it or not, an insurance policy effectively manages risk for any business and industry, including the cannabis industry.
As a growing industry based around an illegal substance (on a federal level and in many locations at the state level), the marijuana industry is risky. Cannabis businesses must navigate uneven, evolving, and new rules and regulations.
The legal atmosphere around cannabis often changes abruptly and daily, which makes it difficult for businesses to sustain themselves in the long run.
Several lawsuits against cannabis companies proved how crucial having a cannabis insurance policy is:
- Cronos Group experienced a securities litigation
- MedMen Enterprises – a US-based cannabis company – faced lawsuits
- CV Sciences – a company that produces and sells Cannabidiol (CBD) products – sued for violations of securities laws
Basic Marijuana Insurance Requirements
If you run a cannabis business in California, there are a few requirements you need to comply with to have valid insurance. Here are the fundamental insurance requirements for California cannabis business:
- The marijuana business in California should have general liability insurance – also called commercial general liability insurance or business liability insurance – of $2 million (minimum). In addition to that, they must have $1 million of insurance for each loss
- California state also requires cannabis businesses to have a surety bond of $5000 addressing to the state
- Cannabis insurance should be acquired from a licensed insurance provider
- The applicants for distributor licenses will provide the Bureau of Cannabis Control (BCC) with certificates showing the kinds of coverage and minimum amounts secured
- Distributors have to notify California BCC within ten days of any change/lapse in insurance
Any marijuana business that falls short of meeting all insurance requirements will find it hard to secure valid insurance. Also, as the marijuana industry evolves, new requirements and regulations are added.
In such circumstances, it’s in your best interest to contact a reliable, credible, and knowledgeable California cannabis insurance provider such as MFE Insurance. Our professionals ensure you’re protected from all unnecessary liabilities and legal hurdles.
Coverage Pricing And Gaps
No matter what, a cannabis business in California should buy a “basic” insurance coverage plan. These coverage plans include commercial general liability insurance (such as personal injury protection PIP on a facility), crop insurance, product liability for defective/damaged cannabis products, property damage liability coverage, worker’s compensation, business interruption, employment dispute coverage, and auto insurance for couriers and delivery vehicles.
Although these coverage areas are crucial, they might not be accessible to all marijuana companies. Also, they don’t include all potential liability areas.
Since marijuana is a relatively new and controversial business area, insurance companies have been slow to make inroads into the weed business market. In addition, coverage plans may not be appropriately priced due to limited insurance supply and the company’s attempt to benefit from small businesses.
When purchasing insurance coverage, consider these factors and conduct thorough research to find the best option for your cannabis business.
Recommended Cannabis Policies For Marijuana Businesses
Listed below are the core coverage plans that form the basis of all risk-management programs for marijuana companies:
General liability provides a range of protection against various risks cannabis companies experience and encounter. Widely known as the “all-risk” or “slip-and-fall” insurance policy, it covers a facility’s property or personal damage and injury.
When an employee sustains a work-related injury, an employer is responsible for lost wages and medical costs. This coverage helps you cover these costs, protecting workers while keeping the marijuana businesses running smoothly.
A cyber insurance policy protects cannabis businesses from third-party litigations associated with digital activities, such as phishing scams. Furthermore, the coverage provides various recovery benefits, from the reimbursement for payroll spent and income lost to data restoration.
Employment Practice Liability Insurance
Any business with employees can face allegation risks like wrongful termination, discrimination, contract breach, and more. This policy protects cannabis businesses against litigations connected to employment practices.
Get Cannabis Insurance From MFE Insurance
Cannabis and CBD businesses in California can easily experience substantial costs if they lack adequate insurance coverage. A cannabis business can be adversely affected by lawsuits to inventory losses without a valid insurance policy that meets all California regulations.
Seeking a reliable cannabis insurance provider in California? Choose MFE Insurance! They provide customized insurance coverage to meet various industry segments and requirements.
If your marijuana and CBD operations need appropriate insurance coverage to handle risks and liabilities often faced in the industry, contact us today!