Insurance for Cannabis Retailers & Dispensaries

Cannabis retail, also known as a dispensary or a provisioning center, is an online or physical store that sell cannabis, hemp, or CBC. Even though it's technically a federally illegal drug the marijuana industry in the United States was estimated at $13.6 billion in 2019 with 340,000 jobs devoted to the industry, and is expected to grow to over $62 billion by 2026.

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Consumers and retailers are integral to the cannabis industry. The growing demand for cannabis, hemp, and CBD has driven up the number of retailers in the industry. So, what does it take to run a cannabis retail store? Here are top things to know:

• Store Ownership: Online retailers use e-commerce sites to sell CBD to consumers while some retailers use physical stores.
• Delivery Service: Retailers use logistic companies to meet demands for CBD products. Online stores and some physical stores offer home delivery services using logistics companies.
• Employees: Online or physical CBD stores hire employees to keep activities going. Online stores may need fewer employees compared to physical stores.
• License: Licenses are required to sell CBD legally. A retailer must verify that the manufacturer has permission to cultivate and manufacture cannabis. An authorized laboratory test report of the CBD products is an important document to also have.
• Insurance: most cities and states requires business owners to have general liability insurance to protect third parties from bodily injury.

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Cannabis retailers are certainly at the risk of legal troubles. Consumers can hold them liable for allergic reactions, sickness, or even death. Since cannabis, hemp, and CBD products can be ingested, the retailers can face claims that could be financially damaging. The sale of edibles, oil or capsules could result in legal problems should there be claims of negative effects on consumers' health. Changing laws and regulations in the hemp industry may cause losses to retailers too.

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Losses could be incurred by employee claims, while auto and property damage are peculiar to physical stores. It may seem that online retailers have less to worry about, nonetheless, there are still risks that may cripple a business.

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Here's a list of the most common types of losses relates to cannabis, hemp, and CBD retailers:

• Product Lawsuit: a customer, or group of customers sue due to a product that causes bodily injury
• Customer Slip: a customer or other third party slips and falls inside a retail location.
• Property Loss: a retail location is damaged due to weather or fire, or someone breaks in and steal product.
• Worker Related: a retail worker trips and falls and gets injured.
• Employment Related: a retail worker is terminated, harassed, or mistreated and files a lawsuit.
• Automobile Related: a delivery vehicle gets into an accident

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Retailers need a range of coverages to deal with the financial impact of claims, depending on the size of their business. A cannabis, hemp, and CBD retailer needs an insurance policy to protect the business against employees' claims, consumer claims, auto, and property damage situations. Below are major insurance policies every retailers, dispensary, or cannabis store should consider having.

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Product Liability Coverage

Since products are commonly ingested, used as topical, or smoked, product liability coverage gives solid protection against all types of claims. Product claims could be about manufacturing or package defects, and health effects on consumers. Although you may not be making the product, since you are selling it provides grounds to be involved with product lawsuits.

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General Liability Coverage

Commercial General liability is almost normal for every business. It covers third party property and bodily injury. For example, if your customer slips and falls inside of your dispensary, a CGL policy will defend you.  

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Workers Compensation and Employee Practice Coverage

Cannabis, hemp, and CBD retail companies with small or large employees are advised to have both types of coverage to take care of employees' claims. Employees' practice coverage is applicable when an employee sues a business due to harassment, discrimination, and employment related claims. Even if the business is not penalized, the legal costs incurred while the case lasted are sorted by the insurance.

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Workers compensation is often applicable to retailers with physical stores, in some states it's required by law (California, check out AB5). Medical expenses for any form of bodily injury employees pick while working is settled with the insurance. If an employee sues a business for injury, the coverage pays for penalties or compensates in the event of death.

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Auto Coverage

Auto coverage is basically for a retail company that owns or hires vehicles to run its services. Auto coverage takes care of auto damage,bodily injury due to accidents, and pays damages when another road user sues. If a company vehicle damages a property the coverage will prove useful.

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Fiduciary Liability Coverage

The cannabis industry is lucrative, so it's not surprising to see some cannabis, hemp, and CBD companies offering employee benefits. If a retail company offers benefits, fiduciary coverage is necessary to have. It shields the business from employees' claims regarding irregularities in employees benefits management.

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Cyber Liability Coverage

Retailers sell directly to consumers and due to this manage private data, such as customers' personal and financial information. Financial data is often collected by online stores that offer many payment options. Payment options like chime, PayPal, or Venmo are targeted by hackers. In addition to high encryption, cyber insurance will protect a business should a cyber attack occur. Cyberattack affects many businesses each year. The best way to prepare is to be cautious, get excellent encryption technology, and solid cyber coverage.

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ADVISOR TIP: set up a meeting with our cannabis advisor and they will assess your operation, discuss key coverage, and go over pricing for a comprehensive insurance portfolio (for free).

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Cannabis, hemp, and CBD coverage are generally avoided by standard insurance companies. Because of the industry's unpredictability, effectively preparing for potential claims and accurately estimating the cost of a premium is difficult. Expert insurers, on the other hand, may examine a hemp/cannabis business and determine the type and amount of coverage required. The best way to assess the premium cost is to consult a competent agent or broker. A cannabis, hemp and CBD company's activities can be assessed by an advisor experienced in the cannabis sector, and essential coverages can be selected. The majority of the time, several elements are to blame for the variation in cost. Evaluations are frequently based on the following:

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Size of the Business

The cost of coverage is influenced by the size of the company and the number of employees. Damages or claims are more likely on a greater production scale, and claims are more likely on a larger employee base.

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The Value of the Property

The worth of the properties in a facility impacts the premium prices because insurance covers repair and replacement costs. The cost of coverage rises in direct proportion to the value of the property.

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Management of Risk

Premium expenses are reduced by effective risk management systems. A company that implements safeguards to reduce bodily injury will benefit from favorable terms or lower costs. An insurance firm may even refuse to insure a corporation that poses too much risk.

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A premium for a hemp company might cost around $5,000 or less according to estimates. The plan will contain General Liability, Product Liability, Worker's Compensation, and various other policies for this amount. However, to get a precise price, contact a Fullsteam Cannabis Advisor by phone, text, or email. Our knowledgeable and experienced agents are well acquainted with the cannabis / hemp industry. We'll provide you with all of the insurance information you need!

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The process to get insurance is an easy and straightforward process. You get us the information we need to engage insurance providers and we'll supply the best possible quote(s). We're also real people that probably live in your city, and we value relationships, so meeting in person is always an option. At the end of the day, our job as brokers and advisors is to educate you on what everything means. It also helps us to understand your business and insurance needs, so we can get underwriter comfortable with quoting. We'll help you understand insurance and risk management practices, and be there for you as the business grows.

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Some traditional businesses can move through the process faster as a lot of underwriting is supported by artificial intelligence, but most policies today will be reviewed by an actual person. We have decades of experience working with the underwriters at each insurance company, and pitch your business to each of them. We work with and for you.

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The standard process to produce quotes for your business is as follows:

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1. Advisor Introduction: this can be a quick phone call, email, video conference or in person meeting. You'll decide if you enjoy the advisor and trust their advice. This is also where you'll be able to ask questions, provide information about your operation, and go over the process to get insured.
2. Data Collection & Underwriting: this is where you'll get into the fine details about underwriting questions and information that will be necessary to engage the insurance market. You'll be able to chose from filling out PDF's, going through our smart-form technology, or provide it all over the phone, email, or in person.
3. Quote Proposal & Review: once your advisor has the information needed for underwriting, they will work with the insurance market to produce quotes. This can take a day or up to a week, depending on the time and operation.
4. Finalize Coverage: here you'll decide the coverage to move forward with. Final steps include signed documents, payment, and selecting a specific start date.

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ADIVSOR TIP: Be prepared to spend 5-10 minutes with your advisor to break the ice and get the ball rolling. Once aligned, your advisor will create clear next steps and create a timeline for quotes. If your business is new, and has unique risks, then you should expect a little back and forth.

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Get in touch with your advisor, or send over the details digitally today.