How Much Does Cannabis Business Insurance Cost?

What affects your insurance costs? Here are the main factors:

Business Size & Revenue

Your insurance is sized to protect your business. Larger businesses with higher revenue need larger amounts of insurance to protect their bottom line. As your business scales and grows, typically your insurance cost does as well, to provide proportional protection.

Type of Cannabis Business

Is your business plant-touching or ancillary? The specific type of business you have will impact the types of insurance you need, which affects your costs because your insurance is tailored to your specific needs. While there are best-practice policies that all businesses should have, cannabis cultivators or testing labs will have a different suite of protection than processors or retail locations.

Location

Where your business is located affects your costs, both on the state and local levels. The state you live in has a large impact on insurance cost factors like natural disasters, while your municipality may have local regulations that insurance needs to comply with. Crime rates in your area and whether you operate in multiple states can also affect your cannabis business insurance cost.

Risk Profile

Plant-facing businesses face higher risk than ancillary businesses. The ongoing federal prohibition of this plant means that the street value of cannabis products is still high, and plant-touching businesses like cannabis cultivators or transporters have a higher risk factor than an ancillary business like making packaging. Increased risk tends to increase premiums.

Claims History

Having a long claims history can drive up your cannabis business insurance cost. It’s not a punishment for making a claim, but a response to the increased need for coverage. Claims can be used to show you where improvements can be made in your business.

While no two cannabis businesses have the same exact insurance, there is a set of policies that is widely considered a “best practice” to have in place, to protect against common business exposures that will usually make up the foundation of your cannabis business insurance cost.

General Liability Insurance

General liability offers broad protection against some of the most fundamental risks cannabis companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.

Product Liability Insurance

Cannabis companies offering tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Product liability insurance covers defense fees and settlements, even for ungrounded claims. This coverage is particularly critical in the cannabis space as testing and manufacturing aren’t regulated at the federal level.

Property Insurance

Property damage can occur in many ways, from violent storms to burglaries to fires. Property insurance helps ease these concerns by reimbursing cannabis companies for direct property loss. Instead of digging into your business savings to find temporary work arrangements or customer appeasement, capital from the policy does the heavy lifting for you. Remember that property loss results in more than merely rebuilding or relocating your business. You might experience loss of business income or accrue extra recovery expenses. This policy covers income lost and payroll during the interruption period.

Cyber Liability Insurance

Cyber insurance protects companies from third-party lawsuits relating to electronic activities (i.e., phishing scams). Plus, it offers many recovery benefits, supporting data restoration and reimbursement for income lost and payroll spent.

Worker’s Compensation Insurance

Employers are typically responsible for their medical costs and lost wages when employees sustain work-related injuries. This policy covers these expenses, protecting employees while simultaneously keeping cannabis companies running smoothly.

Commercial Auto Insurance

Owned auto insurance provides first-party property damage coverage for your vehicle and bodily injury coverage to uninsured or underinsured motorists. HNOA includes coverage for third-party property damage and bodily insuring resulting from accidents during your business.

Insurance premiums can change from year to year, but every business owner strives to keep their premium costs low. There are a few factors that directly affect how much your insurance premium is.

1. Deductibles. Your deductible is the amount you need to pay for something before insurance kicks in. Lower deductibles can increase premiums while higher deductibles can lower them, but higher deductibles can also increase your out-of-pocket costs when an issue arises.
2. Coverage Limits. Your coverage limit is the amount of money that your insurer will pay out against a claim. The amount of coverage you need depends on your business size and impacts the premium: higher coverage limits mean higher premiums.
3. Risk Management. Risk management impacts your insurance premiums by determining how well you cover your exposures. Having a strong culture of risk management, addressing issues before they arise, and empowering employees to speak up when they see something can lead to lower premiums due to less claims.

Tips for Obtaining Affordable Cannabis Business Insurance

No one wants to spend an arm and a leg on cannabis business insurance — but you often get what you pay for. While insurance coverage shouldn’t be the largest line item in your budget, you also don’t want to go with the cheapest option. Other tips to consider are:

• Shop around. Don’t be afraid to compare quotes — and let agencies know you are. Getting quotes from multiple insurers shows you your options for pricing, premiums, deductibles, and coverage limits.
• Work with a specialized broker. An insurance broker with experience in the cannabis industry can help you find the best coverage at the most competitive prices.
• Bundle policies. As the commercial says, bundle and save. Combining multiple insurance policies under one company often results in discounts and savings.
• Implement a risk management program. Effective risk management practices can help you reduce potential claims and stay on top of issues arising in your business before they grow.
• Review your coverage regularly. As your business changes, your insurance should too. Conducting an annual or bi-annual review of your insurance coverage ensures that you have what you need: you’re not paying too much or too little.

Cannabis business insurance is just one piece of the puzzle when it comes to protecting your business, but it’s an important piece. The proper umbrella of insurance coverage provides your business with a safety net, protecting your bottom line and your investment into the company.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by email [email protected] or calling 646-854-1093 for a customized letter or learning more about your cannabis insurance options.