As an industry slated to reach $45 billion in value by the end of 2025, cannabis continues to surge in popularity thanks to broader legalization and cultural trends. In some locations, as many as 88% of the population are in favor of legalizing cannabis nationwide.
Given the enthusiasm behind the production and sale of marijuana, it is no wonder that dispensaries are popping up left and right. However, with this business boom comes a significant consideration: cannabis business insurance.
If you’re considering operating a weed business, it is important to obtain adequate insurance protection. The margins for cannabis, especially at the beginning, can be razor thin; however, one uninsured incident could cause the business to crumble before it has a chance to grow.
Even large, established chains have plenty to worry about when a potential lawsuit could cost tens or hundreds of thousands of dollars. The following are some of the most common mistakes cannabis business owners make when buying insurance. Make sure you’re not doing the same!
Skipping Product Liability
Many cannabis business owners focus on financial protection based on their perception of the most significant risks to their company’s success, such as the safe transport of their product and general liability insurance mandated by the state. However, neglecting to purchase product liability insurance is one of the riskiest things a dispensary can do.
Legal teams continue to report that among the risks cannabis businesses face, product liability remains one of the most common. Dispensaries cannot stop a customer from filing a lawsuit if they react adversely to a particular strain, claiming the product was not of the proper quality or was incorrectly labeled.
As studies continue about whether cannabis is a contributor to heart attacks and other medical issues, businesses must maintain strong product liability insurance so that they are ready to stand up to undue scrutiny of their stock.
Covering Professional Liability With a General Policy
Most states require a general liability insurance policy to receive a business license. However, this insurance package will not necessarily cover a business’s liability risks. For instance, dispensaries are staffed by budtenders who recommend products based on a customer’s goals and preferences. These individuals may even make medical suggestions (e.g., a particular strain tends to be good for pain).
If a customer has a negative experience, they may pursue legal action against the budtender who advised them. This type of repercussion falls under the purview of professional liability insurance, not general coverage. Failure to hold a professional liability policy could leave the business exposed to financial difficulties, including legal fees for representation.
Failing to Follow Instructions
No matter the insurance policy, a business must follow the rules laid out within it. Many cannabis business owners buy their insurance and then think nothing more of it. However, everything from how they store their product to how they lock their store or illuminate it at night could be dictated within their insurance policy guidelines.
Failing to follow the instructions in an insurance policy can lead businesses to purchase insurance that, in the end, will not financially serve them if something goes wrong. This is not a symptom of an insufficient policy; rather, it indicates substandard business practices that must be amended to comply with coverage rules.
Insuring the Product, Not the Property
The focus of any cannabis business is on the cannabis itself. Providing high-quality products draws customers; however, do not forget to insure the property and the products.
Commercial property insurance protects businesses from financial repercussions such as break-ins and property damage. Even a cannabis business with stringent security guidelines, locked safes, and a team of experienced professional guards is not invulnerable to acts of God, burst pipes, and other issues that could cost the company thousands in lost inventory. Property insurance is meant for these types of scenarios.
Make the Smart Choice for Your Cannabis Business with Coverage from MFE Insurance
Anyone considering opening a cannabis business is living in one of the best times to do so, but making the right insurance decisions for this budding enterprise is just as important as choosing which strains to stock. The professionals at MFE Insurance have helped cannabis businesses with the complex web of insurance challenges exclusive to this industry.
Contact MFE Insurance today at (213) 269-4005 or online for a free quote, personalized guidance, and insurance policy recommendations based on your business practices, risks, and goals.