Business Insurance for Medical Marijuana Dispensaries

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Business insurance is designed to protect a business owner’s financial assets and is an essential investment for a medical marijuana dispensary.

 

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About General Liability Insurance

All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).

Some of the risks CGL insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While businesses aren’t legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.

Learn more about the risks covered by general liability insurance.

COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A MEDICAL MARIJUANA DISPENSARY

Example 1: A customer is making a trip to your restroom when he slips on a wet floor and falls to the ground. The impact breaks his arm, and he requires medical treatment. Your general liability insurance policy will likely pay to treat his injuries.

Example 2: One of your employees is carting a stack of boxes filled with edibles from a delivery van into the store when he accidentally hits a customer’s luxury automobile with the dolly. The accident severely dents the side of the car. Your general liability insurance policy will likely cover the cost of repairing the car.

Example 3: One of your customers is excited about some of the new products in your display case and leans too heavily on the glass, causing it to break and their hand to fall through the glass. The customer sustains lacerations that require medical care. The customer files a lawsuit against your business, claiming you are responsible for his injuries. With a general liability insurance policy, your legal costs related to defending yourself from a lawsuit are covered. You also have coverage for the payment of a settlement if you wind up settling the case outside of court.

Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It’s always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.

COST OF GENERAL LIABILITY INSURANCE

The average medical marijuana dispensary in America spends between $350-$750 per year for $1 million in general liability coverage.

Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:

Graph showing average price of general liability insurance prices per industry

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

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OTHER TYPES OF COVERAGE MEDICAL MARIJUANA DISPENSARIES NEED

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all medical marijuana dispensaries should obtain:

Commercial Property Insurance

Commercial property insurance covers the cost of repairing or replacing equipment, inventory, and any owned real estate in the event of a covered event like a fire or severe weather. Even if you don’t own the building that you operate out of, the cost of replacing damaged or lost inventory or equipment out of pocket could be significant.

Workers’ Compensation Insurance

The state that you do business in most likely requires you to carry workers’ compensation insurance if you have employees. With workers’ comp, you have protection for your employees and your business should an employee sustain a work-related injury. In the event of such an injury, your policy will pay for the employee’s medical treatment. It will also help to pay for the wages the employee loses while being unable to work due to the injury.

Product Liability Insurance

Although you do your best to ensure that all of your medical marijuana products are of good quality, there is still a possibility that one of your customers could claim that a product you sold caused them an injury. If the customer thinks that one of your products caused him or her an injury and then files a lawsuit against your business, it could be costly to defend yourself. But with product liability insurance, you have the backing of your insurer. Your policy will pay for your legal fees if you are sued due to a product-related injury, including paying for a settlement if you settle out of court.

TYPES OF COVERAGE SOME MEDICAL MARIJUANA DISPENSARIES MAY NEED

In addition to the policies outlined above, there are a few other types of coverage your medical marijuana dispensary may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Crime Insurance

Medical marijuana dispensaries can become the victim of crime—both crimes committed by outsiders and crimes committed by employees. Regardless of who commits the crime, with crime insurance, you have some financial protection. For example, if someone steals a large amount of your inventory, your crime insurance policy should help to cover some of the cost of replacing it.

Data Breach Insurance

Data breach insurance helps protect your dispensary in the event of cybercrime. For instance, if a cybercriminal were to break into your system and steal customer information, it could cause some of those customers to take legal action against your business. If you have data breach insurance, it will help to cover the cost of your legal fees and any settlements that you may be required to pay.

ADDITIONAL STEPS TO PROTECT YOUR BUSINESS

Although it’s easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business’ financial losses after an incident occurs, but it’s much better to avoid losses altogether.

 

With this in mind, here are three things you can do to better protect your business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
  • Streamline your business’ internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.

FREQUENTLY ASKED QUESTIONS

What is included in a business owner’s policy?

A typical business owner’s policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

What is the difference between business insurance and general liability insurance?

“Business insurance” is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

Do I need insurance before I start a business?

You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.

Will insurance protect my business from everything?

Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.