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Insurance for a Dispensary: What You Need and Why

Forrest Bennett Nov 15, 2022 11:22:13 AM

From grows to manufacturing plants, there are many types of businesses that make money from marijuana. Dispensaries are unique because they are much more client-facing. 

In fact, if you take out the up-in-the-air nature of marijuana’s legality,  your dispensary is closer to a small business than any other cannabis business. As such, it shares similar insurance needs. 

By protecting your business, the public, and the people who rely on your products, insurance offers you peace of mind and valuable income protection when bad luck strikes. 

Going forward, whether you’re new to the cannabis game or old hat, you need to know what types of insurance products you need and which ones will give you the most benefit. 

Armed with this information, you can make educated decisions about your insurance coverage to keep your dispensary open and providing for its customers.

Of course, we’re more than willing to help you if you get stuck. Reach out today for a free, no-obligation quote for insurance for your dispensary.

What Sets Dispensaries Apart

The somewhat legal cannabis industry is relatively new. That means that insurance carriers offer products based on their similarities to other businesses. 

Dispensaries are basically brick-and-mortar storefronts. They face similar insurance needs to any other retail establishment (e.g. property insurance or commercial auto insurance for delivery drivers). Other 

Dispensaries are also the only part of the commercial marijuana industry that are public facing. In contrast, nurseries and grows are closest to agricultural businesses. Their insurance solutions protect the inventory from environmental disruptions and technological malfunction. Manufacturing and processing plants for cannabis are insured like any other processing plant.

What Insurance Dispensaries Need 

So to understand the cannabis insurance landscape and its effects on your dispensary, look no further than the shop down the street and the type of  insurance coverage they get: 

1. General Liability Insurance

Like we said earlier, your dispensary is no different from any other storefront. It has patrons susceptible to slip and falls, plus employees that can damage someone’s personal property. 

General liability insurance covers you in these circumstances: 

  • Bodily injury
  • Lawsuits and Civil Action
  • Additional legal expenses

Without it, your dispensary will have to pay medical expenses if that customer decides to sue. Other types of insurance won’t cover that or third-party property damage claims filed against your business. 

If you’re thinking of sleeping on this one, that may not be an option depending on where your dispensary is. General liability insurance is usually required in property lease agreements. Luckily, this coverage is an investment to protect your business. 

2. Workers’ Compensation Insurance

Nearly all states, with a few fine-print qualifications, require workers’ compensation insurance. Dispensaries are no exception, so this one is a no-brainer for cannabis business owners.  

Workers’ comp insurance exists to protect your dispensary and your employees from expensive accidents. Regardless of the level of bodily injury, this type of insurance safeguards your business income from costs associated with: 

  • Medical expenses
  • Lost wages 
  • Rehabilitation and long-term care expenses
  • Legal and settlement fees

Without workers’ comp insurance, you could be legally liable if an employee is hurt in the scope of their employment. Just an ambulance ride can cost thousands of dollars! Do you want to pay that bill? 

All of these represent potentially devastating expenses you shouldn’t have to cover on your own. Imagine the embarrassment of a broken toe bankrupting your dispensary. 

3. Commercial Property Insurance

If something happens to your building, it will likely impact your expensive equipment, surveillance tech, glass cases and even its furniture. Think about it — the cost of replacing all that could be devastating if you ever hope to reopen. 

Consider the following and the expenses they could mean for your dispensary: 

  • Burglary and theft
  • Weather damage
  • Fires
  • Vandalism
  • Temporary closure

Plus, dispensaries are uniquely reliant on cash flow, so that makes it more vulnerable to theft, burglary, and vandalism. Other types of insurance won’t cover these types of damage claims, so it’s on you. 

Financially, just the cost of commercial property insurance can hurt. If you’re on the fence about it, remember that this insurance also covers: 

  • The property itself
  • Its equipment and tools
  • Inventory
  • Furniture and decor
  • Personal property on site

Protect your dispensary from damaging circumstances and the expense of replacing its expensive contents by adding commercial property insurance. 

4. Product Liability Insurance

What makes THC, cannabis, and hemp products so attractive to customers can also come back to bite you. Everybody reacts to it differently based on product types and body chemistry. 

Legalized marijuana has opened the door for first-time users. These newcomers are unused to the effects of cannabis or cannabis adjacent products and can indulge irresponsibly or experience adverse reactions. 

Even if your dispensary mostly acts as a seller of manufactured products, it’s still open to the legal implications of customer dissatisfaction or mislabeling. 

After all, cannabis is a fickle thing. Products can be impacted by container temperatures, bulk storage with dissimilar products, and bacteria contaminants found in your dispensary. 

Additionally, your dispensary (like a bar or restaurant that serves a driver who later drives drunk) could be found responsible in accidents that occur when a driver is under the influence. 

Should a customer’s complaint be brought to the level of a lawsuit, product liability can cover costly legal expenses and settlement fees that could otherwise be devastating to your dispensary.

5. Professional Liability Insurance

Professional liability insurance also protects your business from customers and their dissatisfaction. Things like mistakes, misrepresentations, and recommendations gone wrong can all have costly impacts. 

Dispensaries, more than any other cannabis business, give out lots of advice to customers. Whether it’s about dosage, flavors, or strains, customers listen to budtenders. 

Though they mean well, your employees can sometimes give bad advice. Improper doses, bad flavor profiles, and a customer’s adverse reaction can all be blamed on your dispensary. 

Regardless of good intentions, there could be legal repercussions. Even if the fault doesn’t lie with your dispensary (say a processor mislabeled a cannabis product as hemp or a product recall was still delivered as inventory), your business could be liable by participating in the sale. 

It can provide coverage for: 

  • Settlement costs
  • Legal representation expenses
  • Court fees

Settle or not, legal expenses alone could hurt your business. This type of business insurance makes it so you won’t have to pay it all yourself.

Your Dispensary's Insurance Future

Medical and recreational marijuana is an attractive business. Dispensaries have exploded on the scene of cities with legalized marijuana. There’s a lot of flux in dispensaries, though. Their success, despite the need they fill, doesn’t seem especially guaranteed. 

There are many contributing factors to their success and failure. Demand, market saturation, and competition all contribute to how a dispensary performs and its longevity. 

A pitfall all dispensaries must overcome is improper, inadequate, or redundant insurance. Without proper coverage, small claims can cost a dispensary everything. 

We know the cost alone can make you flinch. Insurance can be cost-intensive because insurance carriers base their product offerings off historical data and claims information. Knowing that cannabis businesses like dispensaries seem very risky indeed. 

That cost shouldn’t stop you. Whether you’re a landlord making sure your tenant has the proper coverage to protect your commercial property or an owner looking to protect your business, insurance is an investment, not a frivolous expense. 

The risky nature of cannabis businesses has caused insurance carriers to treat them delicately and sometimes not at all. As such, it’s important to find a partner that will treat your business appropriately. 

Insurance for your dispensary will not align with one size fits all insurance coverage, so be sure to find an independent agency like Hopewell to curate a solution with your dispensary’s needs in mind. Reach out to the team today with any questions and we'd be happy to answer them. 

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.”