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Don't Overthink Cannabis Dispensary Insurance: Here's What You Need to Know

Forrest Bennett Jul 14, 2023 2:15:57 PM

Chances are, if you’re reading this, you own and/or operate a cannabis dispensary. You know better than we do that, despite the stigmas that may remain around cannabis, a dispensary is simply another retail business, and the insurance coverage needs, while not identical, are more similar than not. 

Similarities to Retail Establishments

Just like other retail establishments, dispensaries have products, accessories, equipment, furnishings, and more – and maybe smells a little more exciting than a Dollar General.

Ultimately, you need insurance to cover the stuff you’ve worked hard to earn. To that end, you’re going to need a lot of the same coverage that a traditional retail shop does, like general liability and property coverage. You’ll be in even better shape if you have the right expectations for the insurance application process.

Quirks of Cannabis Dispensary Insurance Coverage

Despite all the similarities between your cannabis shop and other retail establishments, the insurance industry is still playing catch up.

Cannabis as a legal commodity is relatively new, as the spread of legalization across the country in the past several years has been slow yet steady, and insurance providers are adapting to its unique needs and varied state and local regulations. Because of its newness and complexity, some insurance companies tend to be cautious when underwriting policies.

However, as the industry continues to evolve and more data becomes available, insurance providers are becoming more comfortable offering coverage tailored specifically to cannabis businesses.

You, the business owner, will feel the pain of the insurance industry’s trepidation around cannabis in three particular parts of this process – the quoting, the turnaround, and the cost.

All of these things should get a little easier over time, but if you are seeking coverage today, it's good to get prepared for the application process so you can minimize the headaches that come with it. 

Cannabis Insurance Quoting Process

Let’s take the quoting process first. You will get lots and lots of questions.

Insurance carriers want to know what you have in your inventory, how and where you store it, how much money you keep on your premises, what security measures you have in place, and even whether a guard dog is present (and if there is a dog, we would love to meet them; we love dogs here at Hopewell).

The list of questions is extensive, so consider downloading our free checklist that will help you prepare to answer this litany of questions before they’re ever asked!

Cannabis Insurance Quote Turnaround Time

We’re talking about the length of time between submitting an application and getting a final quote back – in traditional insurance markets, it is usually the same day or within 24-48 hours.

When it comes to the cannabis insurance market, things can take a bit longer. We’ve seen carriers take up to two weeks to return a quote.

There are a few reasons for this. First, there are still relatively few carriers in the cannabis market. And because the legal cannabis market is still newish, there isn’t a great deal of what the industry calls “claims experiences,” which basically means that underwriters haven’t yet honed in on where the biggest risk factors lie. For that reason, calculating a premium rate takes a bit longer than it does to quote a traditional home and auto policy.

Lastly, as new states’ legal cannabis markets come online, these carriers are inundated with applications. It’s a busy market, but with patience (and a good broker) you can find the best deal out there.

Cannabis Insurance Quote Pricing

Speaking of a good deal, let’s now talk about that third and final factor we mentioned before – cost. One question we get all the time is, “Can you give me a ballpark estimate as to how much it’ll be?” We wish we could, and some agencies do, but the responsible answer is no.

So many factors are considered, from the location of the operation and sales numbers to number of employees and security measures taken. Eventually, as claims experiences grow and better data is available, estimates will be easier to come by.

For now, though, the best thing to do is work with an independent broker who can shop on your behalf and find the best deal.

You Get What You Pay For

We would be remiss if we didn’t mention that the cheapest insurance policy does not mean the best.

If the crown jewel of your dispensary is some custom neon signage out front, for example, and the value of it isn’t reflected in your policy, you may end up very disappointed when damage happens and you learn why your policy was so cheap. 

On the other hand, you also want to make sure that you aren’t getting taken for a ride by your insurance agent.

Study the coverage levels – if you find that you’re insured for four times the amount of inventory you keep in stock, for example, it may mean that your agent is trying to “fluff up” your policy to squeeze a bit more commission out of the sale.

We’re of the mind that a long-term client with a more affordable policy is better to have than selling an unnecessarily inflated policy to a business that will likely look elsewhere when it comes time to renew.

Hopewell Cannabis CTA

At Hopewell, we are trained to look at your operation, find the vulnerabilities and biggest exposures, and craft an insurance program that makes sense. A carrier representative, on the other hand, will look at the same things and see ways to maximize profit for their company.

Additionally, working directly with a carrier makes it more difficult to move your policy should a better deal emerge – and it is very likely that as more carriers compete for cannabis business, and as the industry grows such that risk is spread out, rates will fall. An independent broker is going to shop your policy every year, so you won’t miss out on cost-saving or better coverages.

Find the Right Broker for Your Business

Now that you know that the insurance industry is still learning about how your business works and you have some tips and tricks as to how to find the best coverage, we want to implore you to be detailed and honest with your broker (because you also now understand that it's far superior to working directly with a carrier, right?!).

Imagine that your insurance broker is like an attorney, and you have attorney-client privilege – the more they know about your business, the better they will be able to craft a narrative with insurance companies on your behalf.

The last thing you, or your agent, wants is for something to happen resulting in a claim only to find that the insurance company denies it due to factors they weren’t aware of when they agreed to insure you.

This can make it harder to get insurance moving forward, and will likely cause an excessive rate hike. Nobody but the insurance company wants that – don’t let them win!

Thank you for making it to the end of this blog post. It’s a lot of information but it’s also critical knowledge if you want to be smart with every dollar your business earns – and we know you do.

You’re now equipped to navigate the insurance process. As mentioned several times throughout this article, we at Hopewell would be delighted to help you secure your business (and we also insure home and auto and just about anything else!).

We don’t charge anything to provide you with a quote, and unlike many brokers, we don’t tack on any additional fees, either. We’re just happy to be helpful.

Forrest Bennet is the owner and founder of Hopewell Risk Advisors, an independent insurance agency writing personal lines of insurance and commercial policies for industries ranging from cannabis to restaurants. A born-and-raised Oklahoman, Forrest has been fighting to provide great insurance coverage since 2021. He considers Hopewell Risk Advisors “honest brokers in the protection racket.”