Not all cannabis business insurance policies are created equal. Each dispensary or cannabis business has unique insurance needs, so policies will differ from company to company. With that in mind, there are several options that dispensaries should deeply consider before opting out. However, dispensaries routinely make the mistake of not buying enough insurance coverage in an effort to save money.
This post will expand on the various insurance mistakes that cannabis operators routinely make. Additionally, we will make recommendations on how to protect your business adequately.
Learn more: An Introduction to McGowan Wholesale Cannabis Insurance
Mistake 1: Failing to Buy Commercial Property Coverage
This first mistake is among the most common and crucial errors a dispensary or cannabis business can make. The choice is understandable, however. Commercial Property insurance is often expensive. Even busy dispensaries must contend with slim profit margins, so cost-cutting is always a priority. However, property insurance should not be the first item on the chopping block.
Imagine that a successful dispensary has an advanced safe system and sits a few blocks away from the local firehouse. Even this seemingly secure dispensary is one disaster away from financial ruin. It only takes a single theft, burst pipe, or natural disaster to cost a dispensary upwards of hundreds of thousands in inventory losses. Even small locations should set some of their operations budget aside for Commercial Property insurance. You can work with your insurance broker to identify how much coverage you need and set reasonable limits to save money.
Mistake 2: Overlooking Product Liability Coverage
A recent poll on LinkedIn surveyed cannabis insurance firms and agents who work directly with dispensaries. The poll found that these businesses most often overlook Product Liability coverage. Dispensary operators might think that because they did not “make” the product on-site, they are not liable for any harm that a consumer might face from a faulty product. However, this is not the case. Even if a dispensary sells only pre-packaged products and does not weigh or package loose flower, the business could still be liable in a business recall lawsuit.
And even if the dispensary is not found liable in the suit, the legal costs of defending the case up until that point could decimate a startup or severely impact an established dispensary’s operating fund. The risk is simply too significant for dispensaries to neglect Product Liability insurance.
Mistake 3: Maintaining Bare-minimum Compliance Requirements
Independent dispensaries operate on the slimmest of margins, especially in the early days. There is no shortage of costs – startup fees, licensing, payroll, rent, POS systems, seed-to-sale tracking, and more. Understandably, dispensary stakeholders often opt for the minimum regulator-required insurance coverage (usually a General Liability policy) to cut costs. However, once a dispensary has established operations, there is no good reason to neglect insurance. Cannabis businesses might be tempted to keep the bare minimum coverage indefinitely. However, the safety net provided by proper insurance coverage can be the difference between a temporary setback and a dispensary closing its doors permanently.
Mistake 4: Not Seeking Cannabis Business Insurance Advice
Small and independent dispensaries often make these mistakes in an effort to lower the substantial overhead costs involved in starting and running a cannabis business. But shaving $10,000 off front-end operations by cutting out Property and Product Liability policies may cost a dispensary over ten times that amount in the back end. Large operators might have enough funds to “self-insure” against disasters, but they routinely transfer as much risk as possible using cannabis business insurance policies.
Dispensary owners should seek the expert advice of brokers with industry-specific knowledge to determine adequate coverage unique to their specific operations. The team at McGowan Wholesale Cannabis aims to simplify the insurance process for dispensaries and other insureds in the cannabis industry. Our team has extensive experience in both insurance and cannabis, making us uniquely qualified to guide your company through the constantly evolving cannabis insurance landscape.
Additionally, McGowan Wholesale’s Dispensary program provides agents and brokers with exclusive coverage for cannabis dispensaries, including property, general premises liability, and product liability. It also includes an add-on policy for integrated cultivation, making it the most comprehensive coverage currently available for dispensaries.
Get in touch to learn more.
