October 6, 2023

Cannabis Business Insurance 101

Jay Rosenthal
October 6, 2023

New entrants into the cannabis sector can find securing the right insurance, at the right time, and at the right rates, can be a challenge. 

This is the first installment in a series on key cannabis retail topics, including compliance and regulations, banking and payments, point-of-sale, e-commerce, and insurance.

In new markets, brokers and agenda may not have the depth of experience or knowledge to build effective coverage, leaving retailers with limited guidance to ensure that their small business is properly protected. 

“Insurance is an incredibly important part of successfully operating any business, but continues to be clouded in uncertainty for many retailers working in cannabis. We’ve seen firsthand from our customers how not being properly insured can have catastrophic implications on their business, and therefore it is crucial for them to have access to the right experts who can offer tailored insurance solutions that will ensure the long-term sustainability of their business.” Elizabeth Ely, Senior Manager of Insurance at Dutchie.

At Dutchie, we fully recognize the importance of how enabling cannabis retailers to receive the right coverage at the right time is essential to their success, and have leveraged our extensive experience working in the cannabis industry to provide our customers with the resources they need to properly protect their businesses against the potential risks and liabilities unique to the cannabis market.

Types of Cannabis Business Insurance 

First, it’s important to understand what insurance types are available for cannabis businesses and from there decide what will be the best fit for your own business. For example, if you are opening a brick-and-mortar dispensary, you may have property insurance to consider. What about hiring staff? Will you be making deliveries? Understanding how your business will run can dictate the types of coverage you will need.

Types of insurance that cannabis businesses typically need include:  

General Liability Insurance: Covers the most common business risks such as customer injuries, customer property damage, and advertising injury. Given cannabis businesses are at high risk of these kinds of incidents, it is recommended that they invest in this type of insurance coverage.

Product Liability Insurance: Shields your business from legal and financial consequences resulting from defective or harmful products. In the cannabis industry, where product quality and safety are paramount, this coverage helps cover legal fees and potential settlements if a customer experiences adverse effects or harm from your products. 

Worker’s Compensation: Insurance for your employees that covers medical expenses, lost wages, and provides other financial benefits while under your employment. Worker’s compensation is mandated by each state and will be a key requirement when running your business.

Commercial Property Insurance: Protects your physical assets, such as your retail storefront, equipment and inventory, from a range of perils like fire, theft, vandalism and natural disasters. For new cannabis retailers, this insurance ensures that your business can recover and continue operations in the event of unexpected property damage.

Crop Insurance: Specifically tailored to cannabis cultivators, this type of insurance safeguards your investment throughout the cultivation process by providing coverage for crop losses due to unforeseen weather conditions, pests, disease outbreaks and more, helping ensure a stable supply of products for your retail business.

Cybersecurity Insurance: In an industry that is rapidly adopting more tech-enabled solutions, cybersecurity insurance becomes vital to cannabis retailers in order to protect against data breaches and cyber-attacks. Costs associated with data recovery, notifying third parties affected, and managing legal liabilities in the event that confidential customer information is compromised. 

Considerations When Choosing Your Cannabis Business Insurance 

When looking at the above insurance coverage options, take the below into consideration in order to make the most informed decision that will benefit your business long-term: 

Know your regulations: Different jurisdictions have different regulations and requirements for insurance coverage required to receive licensing. Understanding the types, amounts, and timing of coverage you need is essential to managing your insurance resources appropriately. Insurance is a critical aspect of cannabis compliance, and therefore understanding your obligations and aligning your insurance choices with regulatory demands ensures that you not only stay in business but thrive while doing so.

Choose coverage that can change with you: While you may go into business with a goal of how operations will run, at the end of a year or two, your business may look completely different. Working with an insurance partner that understands your needs, the industry, and the current insurance market is essential. 

Dutchie can help assess your business insurance needs, whether you are just getting started in the industry or are a seasoned operator - get in touch with our insurance team for more details.

About the author
Jay Rosenthal
Lead Content Producer @ Dutchie