Many states allow cannabis to be sold by dispensaries for medical or recreational use. This is an exciting area of business, but when you start a dispensary, it’s crucial that you consider the risks that you may face, from property damage to customer lawsuits. Selecting the right commercial insurance can provide the financial support that will protect your business from serious incidents.

What insurance coverage do I need for my marijuana dispensary?

There are many types of insurance available, but these types of coverage are particularly important for marijuana dispensaries:

Commercial Property Insurance

Commercial property insurance protects the value of your business’s property, including buildings, furniture, inventory, computers, and other items. Since marijuana is highly valuable, dispensaries are particularly vulnerable to property damage. Inventory could be contaminated or destroyed by smoke, fire, or water. Cannabis is a common target for theft as well, and criminals could destroy your property while breaking into your business. 

Although you can protect your property by taking safety and security measures, damage can still occur. Commercial property insurance can provide funds to replace or repair your business property if it is destroyed or damaged by a covered peril such as fire, explosion, storm, vandalism, and more.

Example:

• Vandals shatter your store’s windows and graffiti the interior. Commercial property insurance would cover repairs and clean-up costs.

General Liability Insurance

General liability insurance covers claims of unintentional third-party bodily injury, property damage, and personal injury. As a retail store, you likely see numerous customers each day, not to mention partners and other vendors who may be on your premises for meetings or deliveries.

If visitors to your marijuana dispensary injure themselves, or if you inadvertently damage their property, you could be held liable and sued. General liability insurance can step in to cover legal costs, medical expenses, and damages for these incidents.

To reduce risk of injury, make sure floor surfaces and coverings are in good condition and any uneven steps are clearly marked. Parking lots and sidewalks should also be in good condition and free from any debris, snow, or ice. 

Examples:

• A customer visits your shop on a rainy day. The entrance to your store has tracked a lot of mud and rain, and the customer slips and falls. She ends up injuring her wrist as a result of the fall and must seek medical attention. Your general liability policy would help cover medical expenses for the customer, as well as any legal fees if she decides to sue your business.

Product Liability Insurance

Product liability insurance can step in to protect your company against claims of bodily injury or property damage caused by products you sell. This is a key coverage for marijuana dispensaries since customers could suffer injury or illness as a result of ingesting or using your products. In addition, the variation in laws regulating marijuana in different states could lead to confusing liability situations, increasing the risk that you could be sued. 

If you are sued due to damage or injury caused by a product you sold, product liability insurance will provide funds to cover your legal fees and any resulting settlements. This coverage is typically included as part of a general liability policy; however, companies with a higher risk of claims may wish to choose a standalone policy. 

Example:

• Your dispensary sells a line of cannabis vapes that are found to be defective and overheat quickly, injuring customers. You are named in a lawsuit brought by the injured customers. Your product liability insurance would cover your legal fees and pay any settlement that results.

Commercial Crime Insurance

Because marijuana dispensaries sell valuable products with high resale value and accept cash payments, crime is a major concern. Although alarm systems and thorough background checks can help you reduce your risk, it’s impossible to completely avoid the risk of crime committed by outside parties or by your own employees.

Commercial crime insurance can step in to reimburse you for losses caused by theft, robbery, fraud, forgery, burglary, and other crimes. This coverage applies to crimes committed by your own employees or by others. 

Example:

• After noticing irregularities in your inventory, you realize that an employee had been stealing stock and reselling it. Commercial crime insurance would cover the loss.

Commercial Auto Insurance

Some marijuana dispensary businesses may own or lease vehicles to make deliveries or pick up inventory. If your business owns cars, trucks, or vans, you’ll need to purchase a commercial auto insurance policy to cover them. 

Commercial auto insurance will pay for damages if you or your employees are at fault in a collision while driving a company-owned vehicle. Commercial auto insurance also covers your company vehicles if they are physically damaged or lost due to theft, vandalism, collisions, or other hazards.

If your company’s employees use their own vehicles to run errands or make deliveries for the business, you will likely need hired and non-owned auto insurance to cover them, as personal auto insurance may not be sufficient to cover claims for accidents that occur while someone is driving a personal vehicle for work purposes. 

Example:

• While driving the company van to deliver inventory to another store, your employee runs a stop sign and hits a pedestrian. Commercial auto insurance would cover the pedestrian’s medical bills and any legal fees if your company is sued. 

Workers’ Compensation Insurance

If employees are injured or fall ill as a result of their work, workers’ compensation insurance will provide financial and medical benefits. Employees of marijuana dispensaries could suffer common slip-and-fall, heavy lifting, or repetitive strain injuries; in addition, there is a higher risk of robberies during which employees may be injured. 

Workers’ comp will pay for medical expenses, lost income, and rehabilitation for injured workers, and it can also provide death benefits and funds to cover funeral costs in the case of a work-related death. Workers’ comp coverage is legally required for companies with employees in most states, and penalties can be severe if you do not have adequate coverage.

Example:

• While lifting heavy boxes of products, your employee wrenches his shoulder and requires medical attention. Workers’ compensation insurance would cover his medical expenses. 

Additional Coverages

• Cyber liability insurance protects your business from the financial consequences of cyberattacks, data breaches, and other cyber threats. Dispensaries may offer online sales and store sensitive customer information such as credit card numbers and addresses; if this data is breached, you may be held liable. Cyber liability insurance can provide the funds to defend your business in a lawsuit, as well as any expenses necessary to recover from a cyber event.
• Employment practices liability insurance (EPLI) protects your business against lawsuits by prospective, current, or former employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.
• Business income insurance will reimburse you for lost income and operating expenses if your business is temporarily unable to operate due to a covered reason, such as fire, storm damage, or other property damage.

Pricing and Quotes

Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a dispensary with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for marijuana dispensaries:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Final Word

When you operate a marijuana dispensary, you are exposed to a number of potential liabilities, from customer lawsuits brought by people who were negatively affected by your products to slip-and-fall injuries or property damage. It’s important to protect your company with a wide range of business insurance. This coverage can provide financial protection that will enable your business to function normally even after a costly disaster or lawsuit.