The cannabis industry is ever evolving. As of November 2023, 24 states and the District of Columbia have legalized marijuana for medical and recreational use, according to The Hill. With legalized cannabis also comes an increased demand for dispensaries.
As with other cannabis operations, dispensaries face unique risks unlike those of other businesses. Understanding the nuances of insurance is paramount for safeguarding your investment and ensuring legal compliance.
Today, we will explore the importance of this type of coverage in addition to the factors influencing dispensary insurance costs. Whether you're a new entrant in the cannabis market or looking to refine your existing insurance strategies, this article is designed to equip you with the knowledge needed to protect your business.
The Importance of Insurance for Dispensaries
It is no secret that marijuana businesses face unique risks in addition to complying with federal and state laws. However, even within the cannabis industry supply chain, there are nuances. The cannabis business insurance needs of a grower differ from those of a dispensary, for example.
Dispensaries require insurance to protect their property, cannabis products, and more. Let’s explore some of the distinctive risks associated with this type of business property:
Cyber Threats
One of the most pressing threats to dispensaries is cyber security. Cannabis retailers are more exposed to cyber threats than others in the supply chain. They are constantly managing customer information, inventory, and payments.
Cyber threats, internet exposures, and stolen customer data can be detrimental to dispensaries. Last year, the Ontario Provincial Police (OPP) investigated a major data breach affecting 1,200-plus regulated cannabis stores in the Canadian province. There was concern that the leaked information might increase security risk since it released important inventory data.
This is but one example of why dispensaries require cyber protection. As some dispensaries are able to accept credit card payments, it’s also paramount to protect against credit card processing breaches.
Burglary
While credit card payments are becoming an option, cash remains king at dispensaries. That is because marijuana remains illegal at the federal level, and major payment networks don’t allow cannabis purchases with a credit card, explains NerdWallet.
The reliance on cash payments puts dispensaries at risk of break-ins and property damage. It is important to invest in property store security and insurance to protect against theft at all levels, from in-store and in transit to insider theft.
Product Tampering
Dispensaries also face risk when it comes to product tampering. While growers prioritize protecting their crops from vandalism, wildlife, and weather, dispensaries must ensure the products they’re selling are compliant.
Products must be properly stored and displayed to prevent spoilage and tampering. Business owners should also take special care to choose reputable manufacturers and take steps to protect their reputation both pre- and post-sale.
Of course, these aren’t the only risks of operating a dispensary. Like other businesses in the industry, dispensaries must also be cautious of injury or property damage, employment-related claims, supply chain disruptions, and more. The right marijuana dispensary insurance can be tailored to the unique needs of your dispensary to cover these risks.
Common Dispensary Insurance Costs
As you can see, dispensaries face unique risks, from product liability to property damage, making tailored insurance coverage not just a necessity but a strategic business decision. Since dispensary insurance is highly personalized, costs can vary.
Here, we explore five key types of cannabis insurance coverage and their costs typically associated with a dispensary:
General Liability Insurance
This type of insurance is foundational for many businesses. It covers claims of bodily injury, property damage, and advertising injury that occur on the dispensary premises or as a result of the business operations.
Premiums may be influenced by your dispensary's location, size, foot traffic, and hours of operation. For instance, areas with higher crime rates or more foot traffic might see higher premiums because they are deemed to have more risk.
Product Liability Insurance
This is essential protection against claims arising from the products sold, such as adverse reactions or mislabeling. In other words, it protects against financial loss arising out of the legal liability incurred by an insured because of injury or damage resulting from the use of a covered product.
Insurance for your product as it departs from your facility is vital for the long-term success of your business. The types of cannabis products you sell (edibles, flowers, topicals), their THC content, and compliance with state regulations can affect this dispensary insurance cost.
Property Insurance
Another important type of marijuana insurance covers damage to the dispensary building, equipment, and inventory. It protects against unexpected events such as fire, theft, or vandalism.
To receive an accurate dispensary insurance cost estimate, the property will be evaluated. Key factors such as location, security measures in place, and the potential for natural disasters are key factors in determining premiums.
Workers' Compensation Insurance
This provides coverage for medical expenses and lost wages if employees are injured at work. Every business that has employees needs to think about workers’ compensation insurance since it is required by law in each state.
The number of employees, their roles, and the dispensary’s safety record plays a role in costs. Luckily, being employed at a dispensary as a cashier is inherently less risky than being a cultivator or grower who works with heavy machinery, so costs can be relatively lower.
Cyber Liability Insurance
Cyber liability insurance is a type of insurance designed to cover consumers of technology services or products. More specifically, the policies are intended to cover liability and property losses from electronic activities, data breaches, and more.
As with other dispensary insurance costs, the size of your business and past claims plays a major role in your premiums. Investing in strong cybersecurity measures is recommended.
Honorable Mention: Crop Insurance
For dispensaries that grow their own cannabis, this insurance protects against crop loss due to unforeseen circumstances like extreme weather or disease. It’s an important type of cannabis insurance if you want to branch out.
Find Dispensary Insurance
Whether you focus on indoor, outdoor, or greenhouse grows, the experts at World Insurance can help tailor a cannabis insurance plan that protects your business. Our team understands the unique risks dispensaries face and has experience crafting cannabis dispensary insurance.
Learn more about your options for dispensary insurance today!