Cannabis Industry Insurance Myths


There’s no denying the cannabis industry is growing like a weed. As new states continue to legalize medical and recreational cannabis, the demand for weed-related products has skyrocketed. This explosive growth has led to a surge in cannabis businesses of all shapes and sizes. From dispensaries to grow operations, the cannabis industry now employs more than 428,059 people nationwide.

However, this rapid expansion also poses unique risks for prospective cannabis entrepreneurs. In fact, anyone who operates or owns an interest in a business that manufactures, sells, or transports cannabis needs to understand their insurance options. Because an uninsured loss can be devastating for any small business owner. Here are some common myths concerning insurance in the cannabis industry and why you shouldn’t assume you don’t need it just because finding insurance coverage for high-risk and niche industries is more challenging.

Myth #1: Insurance is Too Expensive for the Cannabis Industry

One of the biggest misconceptions about cannabis insurance is that it’s just too expensive to be worth the cost. While it’s true that the insurance industry may charge more for high-risk industries such as cannabis, rates for cannabis businesses are not necessarily prohibitive. You may pay higher premiums because of the inherent risk associated with your business, but you won’t necessarily be denied coverage outright simply because you work in the cannabis industry.

Most insurance companies simply require that you purchase a business owner’s policy (BOP) to cover general liability and property damage. You should also purchase workers’ compensation coverage for your employees. Your business insurance agent can work with you to find the right combination of policies for your particular business.

Myth #2: Cannabis Entities are Automatically Excluded From Standard Insurance Policies

Not all standard business insurance policies automatically exclude coverage for businesses involved in cannabis cultivation or transportation. However, it’s important to clarify in your application that your business engages in the use, sale, or manufacture of cannabis products. Doing so will allow you to purchase a standard commercial general liability (CGL) policy that will protect your business against most common claims like slips and falls, negligence, or product defects.

For example, many of our policies already cover the common types of damages that happen in the cultivation and transport of cannabis. Your agent can help you determine whether or not your business insurance policy will cover you, along with what type of coverage your policy will include.

Myth #3: Cannabis Companies Can’t Get Coverage Because of Being A High-Risk Business

A high-risk designation simply means that your company has a higher likelihood of incurring a loss than a typical company in the same industry. Insurers have a variety of tools, such as increased deductibles, special investigation fees, and more frequent inspections, to manage the higher risk of insuring a high-risk business. However, high-risk designations don’t necessarily mean that your company is uninsurable.

Any business with a higher risk of loss should have supplemental coverages to protect against a loss exceeding the amount of their standard policy. These extra coverages include a business owners policy (BOP) that provides broader coverage and commercial property insurance to ensure the safety of your business property. A high-risk designation on your insurance policy simply means that you’ll pay a higher premium than a business with lower risk. Working with a specialty business insurer with a focus on your industry can help to reduce costs for insurance, as all of the policies the company writers are in your high-risk industry.

Myth #4: Cannabis Entrepreneurs Don’t Need Insurance Because it’s Still Illegal Under Federal Law

The federal prohibition on cannabis doesn’t mean that you should operate your business without coverage. If you’re an owner or operator of a cannabis business, it’s important to protect your business against all foreseeable losses. Don’t assume that no one can sue you for damages because your product is illegal on the federal level.

Whether it’s a slip and fall, a defective product, or a workers compensation claim, it’s important to have the proper insurance in place to protect your business from financial losses. If you’re careless or negligent in your operation, you may be held personally liable for damages. Your business insurance will protect you from those types of claims, and you’ll sleep better at night knowing that your assets are protected.

Myth #5: Your Employees are Covered by Workers Compensation and you Don’t Need More Insurance

Workers compensation is a government-mandated insurance policy for employees that covers medical expenses, lost wages, and other benefits related to work-related injuries. However, it does not cover damages related to a lawsuit filed by a third party due to faulty work conditions or negligent oversight.

In the cannabis industry, where things like pesticides and mold can create toxic work environments, it’s important that managers provide safe conditions for employees. If you don’t have the proper insurance to cover a workers’ compensation claim, you’ll be responsible for paying out of pocket and, depending on where you operate, could have to pay fines.

Myth #6: You Don’t Have to Have Business Insurance if You’re a Self-Employed Cannabis Grower

If you use your personal property to grow or sale cannabis, you may be exempt from some insurance requirements under certain states’ laws. However, many states require that small business owners carry either a BOP or a commercial property policy to protect against liability claims, even if they grow cannabis on their personal property.

Call to Get a Quote for Cannabis Insurance Today

As cannabis industry continues to grow, it’s important that cannabis entrepreneurs understand the unique risks associated with their business. Unfortunately, many cannabis entrepreneurs believe some common myths about insurance coverage. It’s important to make sure that you’re operating your business with the proper insurance in place to protect yourself and your assets. You are your business’s first line of defense against loss, and proper insurance coverage will ensure that you are protected against the risk of a significant loss.

Millers Insurance Group provides a variety of cannabis insurance options. Please reach out to us or fill out our online form to get an insurance quote today for your company’s insurance needs.

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