Questions About Cannabis Insurance?

Whether you’re an insurance broker interested in expanding into the cannabis industry, or a cannabis business owner, we’ve provided a list of our most frequently asked cannabis insurance questions below. Still, have questions after reading?

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FAQ

Currently [06/2022], there are many insurance products that will cover your cannabis business. Working with a knowledgeable cannabis insurance broker and reviewing policy coverage forms ensures the policy you purchase has the right coverages and limits for your needs. Be mindful that there are still insurance policies that market themselves as able to cover cannabis businesses but exclude coverage for cannabis products.

A cannabis business insurance policy is an insurance policy covering the risks associated with running a standard business and also covers cannabis-specific products and business activities. The coverages may include product liability, general liability, premises, property, and certain auto liability.

General Liability for cannabis businesses usually includes general liability coverage for the premises and products and completed operations liability. These two coverage parts cover your liability from your business’s general operations and liability related to your products’ use and consumption.

Cyber Liability provides businesses with a combination of coverage options to help protect the company from data breaches and other cyber security issues. Cannabis businesses storing tracking, sales, and customer information have exposure to cyber attacks and data breaches. Cyber Liability can also help cover first and third-party losses.

Cannabis Crop Insurance covers non-processed plants, generally at cultivation facilities. Depending on the policy language or coverage selected, Cannabis Crop Insurance could cover living plant material (germinating plants, seedlings, vegetative plants, flowering plants, clones, etc.), harvested plant material (unprocessed, drying, or curing), and/or finished stock still at the cultivation location awaiting sale or delivery to the customer.

A cannabis insurance broker represents a cannabis business in finding and purchasing the right insurance products for their business. An insurance broker will work closely with the business to identify their insurance needs and assist in completing and submitting insurance applications. A broker who focuses on cannabis insurance should know about various cannabis insurance products, their coverage options, and exclusions.

Every cannabis dispensary should have three business insurance types: commercial property coverage, premises general liability coverage, and products and completed operations coverage. The limits of each will be specific to each business’ needs. General Liability for both premises and products generally starts at $1M per occurrence/$2M aggregate for all claims in the policy period. Property coverage should cover your building (if owned by the business), your improvements to the building (if the business is a tenant), your stock held for sale, business personal property, and business interruption at a minimum. Additional optional coverages available to cannabis business owners will supplement those policies if needed.

There are Insurance Brokers that sell cannabis insurance; then there are Cannabis Insurance Brokers. The difference? A cannabis insurance broker specifically serves the cannabis industry and understands the needs of a cannabis business and the insurance products that seek to serve those businesses. That is not saying a broker who does not specialize in cannabis insurance wouldn’t be able to find you good coverage, but one who does will, most likely, be better equipped to answer your questions.

Whether or not your state has regulations making certain insurance coverage mandatory for your cannabis business is a state-specific issue and is subject to change at any time. We recommend you contact the entity responsible for cannabis regulations in the State of Oklahoma for the most up-to-date information on insurance requirements.

The cost of cannabis insurance will depend on the class of operation being insured (dispensary, cultivation, extraction) and the coverage and limits selected. Insurance companies will rate based on the business class, selected coverages, limitations, and the risk’s exposure to certain hazards. The range of premium is quite broad, with a smaller dispensary with low limits costing a few thousand dollars and a more extensive cultivation operation costing tens of thousands.

The number one peril covered by commercial property insurance for the cannabis industry is fire. It would be surprising to find a commercial property insurance policy directed at the cannabis market which excludes fire.

Whether it’s California or another state, the insurance limit will vary between programs and policy types. Property, general liability, and product liability limit maximums are based on the capacity allowed by the insurance carrier and any reinsurance partners.

Theft coverage is available to cannabis businesses in Washington and other legal cannabis states. The availability of this coverage depends on the insurance company’s offerings and the product they are offering. Be sure to consult your broker to find the appropriate theft coverage for your business.

An operation that cultivates or grows cannabis should have the same three main coverage forms covering their business; property, premises general liability, and products and completed operations liability. A grow operation should ensure that their policy covers living plants, harvested plant material, and finished stock, as their business deals with the cultivation of the cannabis plant at different stages. Other optional coverages within and beyond the aforementioned main coverage forms can be identified by the business discussing those options with their broker.

Whether or not your state has regulations making certain insurance coverage mandatory for your cannabis business is a state-specific issue and one subject to change at any time. We recommend you contact the entity responsible for cannabis regulations in the State of California for the most up-to-date information on insurance requirements related to obtaining a cannabis business license.

Whether or not your state has regulations making certain insurance coverage mandatory for your cannabis business is a state-specific issue and is subject to change at any time. We recommend you contact the entity responsible for cannabis regulations in the State of Oklahoma for the most up-to-date information on insurance requirements.

When it comes to vape product recalls or any product recall, the best course of action is to comply and cooperate with regulators in their requests. Regarding insurance and product recalls, a Limited Product Withdrawal Expense coverage may be available on your policy. This coverage helps cover the costs of executing product recall actions.

General Liability insurance for cannabis businesses ranges in cost based on the size of the operation, the limit of insurance selected, additional optional coverages, and the premium rate charged by the company providing the insurance policy. If you are concerned with the premium being charged for your general liability coverage, consult your broker to compare your current policy with others available on the market.