Close up of a miniature shopping cart holding marijuana leaves

What Kind of Cannabis Insurance Do Stores Need?

kase
Sep 21 2022

After the Cannabis Act came into effect, we’ve seen cannabis stores emerge all over Canada. Currently, there are more than 1,000 legal cannabis stores. However, researchers say that the numbers are not yet enough to make the product fully accessible. So if you’re someone looking to open your own cannabis store in Ontario, it can be a promising and exciting undertaking in this growing market. 

But like many who have been in the first steps of opening your own store, you might be wondering if you need cannabis insurance and if so, what kind? You’re definitely in the right place—because we’ve got the answers.

In this article, we will talk all about the fundamentals of cannabis insurance in Canada and what coverage is needed so that you are protected from the most common legal and financial risks.

Let’s get started!

A woman walking into a dispensary with a cannabis logo in the background

What is Cannabis Insurance?

Cannabis insurance (AKA cannabis liability insurance) is a specialized kind of insurance policy that has different types of coverage needed by a cannabis store or retailer. With this insurance policy in place, business owners can focus fully on running the business, knowing that they are covered in case of property damage, theft, spoilage of stock, business interruption, product-related injuries, and various other liabilities.

Medical, legal, or repair costs due to liabilities can bring your business to a grinding halt if you’re not armed with sufficient coverage. This is why having a cannabis insurance policy can be a real lifesaver for both established and new businesses in this growing market. 

What Coverage Can Cannabis Insurance Include?

Not all cannabis insurance policies are equal. To get the peace of mind that you deserve as you open your new cannabis store in Ontario, you need a policy that will give you extensive coverage that can protect you from the most common liabilities that these stores face. 

Here at KASE Insurance, we work closely with our clients to give them the tailor-fit insurance policy that they need. You can think of your cannabis insurance as a set of commercial insurance policies that you would need for your store, therefore it can include the following:

1. Commercial Property Insurance For Your Cannabis Store

With commercial property insurance included in your cannabis insurance policy, you will be able to have coverage for the following:

Property damage

Any business that has a physical location for their operations needs coverage in case of property damage due to natural disasters, robbery, or vandalism. This coverage will help with the costly repairs associated with the above circumstances. 

Damaged or Stolen Equipment, Documents, and Personal Belongings

The coverage for property damage can be extended to also cover the costs associated if any of the following is damaged or stolen:

  • Equipment damage (computers, phones, boilers, etc.);
  • Company documents (e.g. accounting records, client files, etc.); and
  • Personal belongings of the employees. 

Spoiled or Stolen Inventory

One batch of spoiled cannabis products can cost your business a lot. Furthermore, some cannabis products could be stolen by staff because of the product’s small size and high value. This is why coverage for spoiled or stolen inventory is very important for your cannabis store.

Income Losses During Business Interruptions

There are a number of reasons why business interruptions can happen to your cannabis store, such as a natural disaster, weather anomalies, customers avoiding your area because it is considered unsafe, and orders of civil authority. With this cannabis insurance in place, your business is covered for the income lost during such circumstances.

A cannabis storefront with a “Sorry, we’re closed” sign

2. General Liability Insurance For Your Cannabis Store

With general liability insurance included in your cannabis insurance policy, you will be able to have the following types of coverage:

On-site third-party injuries

This coverage shoulders the medical and legal costs associated with a customer injury happening within your place of business. This also applies to suppliers who might be in your cannabis store to make deliveries. 

Damage to third-party property

If your employee visits a customer’s property (such as when making a delivery) and causes property damage while doing so, this cannabis insurance will help with the legal costs and/or repair costs associated with the incident. 

Reputational liability

In the occasion that libel, slander, or copyright infringement causes injury to your cannabis business, this is the coverage that you will need for the associated costs and losses. 

Product liability

One of the most important types of coverage you will need is product liability coverage. As an organic drug that is taken into the body, cannabis can cause a few unexpected reactions which may be due to a person’s physiology or drug interactions.

A few examples of unexpected side effects that can occur in some individuals include heart attacks, seizures, stroke, and cardiac arrest. For these reasons, your business should be protected from legal and/or medical costs by having this type of cannabis insurance coverage.

A close-up of cannabis buds in a jar

3. Worker’s Compensation Insurance For Your Cannabis Store

With worker’s compensation insurance included in your cannabis insurance policy, your business will have these types of coverage:

Medical expenses and lost wages

In case one of your employees gets a work-related injury or illness, worker’s compensation insurance will cover the medical expenses and lost wages. This also applies to the ongoing care costs if an employee becomes severely ill or injured on the job.

Funeral expenses

In the unfortunate event that your employee loses their life due to a work-related accident, this coverage will help with the funeral costs and the death benefits.

4. Commercial Auto Insurance For Your Cannabis Store

If your cannabis store has its own vehicle or vehicles (for transport and/or for delivery), then you will need commercial auto insurance included in your cannabis insurance policy. This way, your business will have these types of coverage:

Bodily injury and property damage

If one of your vehicles is responsible for an accident that results in injury, death, or property damage, this is the coverage you need to cover the legal, medical, and/or repair costs.

Miscellaneous damage

This coverage helps in the event that your company vehicle gets stolen, vandalized, or damaged due to natural disasters.

5. Cyber Insurance For Your Cannabis Store 

Symbols of cyber security on top of an image of a person typing on their laptop

If you have an online cannabis store or a website where consumers enter their information to place orders from your store, you should include cyber insurance in your cannabis insurance policy to protect your business in case of a cyber attack.

It will cover the following: 

Investigative Work

To know the reason and extent of the cyber attack, you will need to hire a team of professionals to do the necessary investigative work and gather the evidence for the authorities.

Losses

When a website server is down, this leads to business interruption. Ultimately, it leads to financial losses. Cyber insurance covers losses due to downtime and operational disruption.

Lawsuits

If your customer's data gets exposed, the possibility of a them suing you is relatively high. Cyber insurance will cover fines and legal fees associated with lawsuits and settlements.

Notifications

The law requires you to let your customers know if a data breach has occurred and if their data is exposed. Cyber insurance will cover the fees necessary to make an announcement.

6. Umbrella Liability Insurance for Your Cannabis Store

If you already have purchased several liability policies for your business, umbrella liability insurance is an optional purchase that provides more coverage if you require a higher policy limit. 

If you're thinking of expanding your business but require a higher policy limit or someone sues you, and you have exceeded your existing liability policy, you can use your umbrella liability insurance coverage to pay for the remaining costs. 

However, you can only purchase this insurance with other liability policies (like general liability insurance) because this is not standalone insurance. If you’re thinking of purchasing multiple policies together with umbrella liability insurance, KASE Insurance also offers personalized insurance bundling.

7. Product Recall Insurance for Your Cannabis Store

A person holding a cannabis pre-roll

If your cannabis store sells directly to customers or supplies third parties who offer it to their customers, you will need product recall insurance in your cannabis insurance policy.

As its name suggests, product recall insurance covers costs and fees related to recalling a batch or production from the market that poses a risk of bodily harm to customers and third parties or causes property damage. 

This type of insurance has two types of coverage:

First-Party Expense

This refers to costs associated with:

  • Notifying the customers;
  • Covering shipping costs;
  • Warehouse and storage costs; and
  • Extra labour for disposal of products.

Third-Party Expense

This coverage pertains to costs relating to:

  • Recall expenses of third parties to recall products bought from your store;
  • Business interruption, such as loss of income, to third parties due to products;
  • Costs to repair third party's reputation; and
  • Costs to purchase substitutes for recalled products. 

First-party expense is enough coverage if you directly sell cannabis to customers. However, if you sell your products to third parties who sell them to their customers, you will need third-party expense coverage to protect your business. 

Where Can I Get Custom Cannabis Insurance in Canada That Fits My Needs?

As one of the leading providers of commercial insurance in Ontario and the rest of Canada, we at KASE Insurance understand that each of our customer’s needs is different. This is why we make sure to pay close attention to what those needs are and put together the best insurance policy to address them. 

As you start out your journey in opening a cannabis store in Ontario or anywhere in Canada, we will be more than happy to equip your business with the cannabis insurance it needs to lessen risks and ensure success. 

Take the next step towards having peace of mind as you run your business. Contact us today or get started with a quick quote

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