Cannabis Insurance

One of the fastest-growing industries in Canada, the cannabis industry provides a broad range of products for recreational and medicinal use including dried cannabis flower to smoke, edibles, beverages, and vaping oils. The recreational cannabis market was estimated to be worth $2.6 billion in 2020 and is projected to rise to be worth $8.62 billion by 2026. The rapidly changing marketplace includes significant risks that call for business owners to protect themselves with a comprehensive cannabis insurance policy.

Cannabis insurance is a policy designed to protect cannabis producers and retailers from specific risks, such as third-party bodily injury, equipment protection, product recalls and general liability. Competing in a rapid growth industry, it’s vital to mitigate the risks that can disrupt your business operations.

Cannabis insurance coverage can include several types of policies, including:

• Commercial General Liability (CGL) Insurance: Commonly referred to as ‘slip-and-fall’ insurance, CGL safeguards your business from risks related to running your daily operations, such as a third-party bodily injury or property damage claim. CGL also typically includes product liability insurance, which is vital for cannabis businesses, as it covers you for any third-party lawsuit or allegation arising from the products you grow, manufacture, distribute, or sell.

• Commercial Property Insurance: If you own a retail store, office, warehouse, storage facility or greenhouse related to your cannabis business, you shouldn’t run the risk of not protecting the building and its contents. That’s what commercial property insurance is designed to cover if you suffer damage or loss related to severe weather, a natural disaster, fire, theft, or vandalism.

Commercial property insurance can also include:

• • Stock inventory coverage provides financial protection for seeds, plants, and finished stock (for indoor cultivation operations).
  • Business interruption insurance: While business interruption coverage does not include financial support for pandemics, infectious diseases, or government-mandated public health closures, it does cover you for any net income you lose from an insured event, such as a fire or flood. It includes coverage for your overhead operating costs, commercial property rent or lease payments, as well as your employees’ lost wages when your business is closed.

• Equipment Breakdown Insurance: For cultivators, growers, and producers, you need to protect the machinery and equipment you use. Equipment breakdown insurance does precisely that: it covers the cost to repair or replace your equipment if it has a mechanical or electrical malfunction.

Additional coverage:

• Errors and Omissions (E&O) Insurance: E&O coverage is recommended for professional or medical cannabis consultants to protect them from claims of negligence, product failures, and media and advertising activities if you’re sued for defamation, libel, or slander. Suppose you fail to deliver a service as promised or face misconduct allegations. In that case, E&O insurance is designed to provide you with financial support for your legal defence costs and any court-ordered settlement.

All licensed businesses in the cannabis industry in Canada require insurance to protect themselves from potential lawsuits, including: 

• Cultivators and producers whether indoor, outdoor, or in greenhouses
• Cannabis and cannabis-related product manufacturers
• Cannabis consultants
• Medical dispensary owners and general retailers
• Micro and craft growers
• Distributors and wholesalers
• Harvesters and processors
• Hemp product producers

Every cannabis industry-related business is unique, and your coverage requirements may vary. Partner with our licensed broker team and discuss a customized policy that’s suitable for your cannabis business insurance needs.

How much cannabis insurance costs vary significantly between different insurance companies. Insurers consider several factors when calculating your premium, including: 

• Training and experience
• Legal certification and applicable licenses
• Years in operation
• Your annual and projected revenue
• Your business’s claims history
• The coverage limits you require
• The products and services you provide
• Number of employees

Determining how much cannabis insurance coverage your business needs boils down to the type of operation you’re running and what liability risks you face. As a licensed cannabis business, your province may require you to carry a specific amount of coverage. For example, in Ontario, cannabis business owners must have at least $5 million in commercial general liability coverage. Talk to a Zensurance licensed broker to determine what and how much coverage you require based on your location, how to mitigate your liability risks, and ensure there are no gaps in your coverage that leave you exposed to the possibility of a third-party lawsuit.