The Effect of Cannabis on Business Insurance Rates in 2019

As more states across the country legalize recreational cannabis, the emerging question among the industry is, does legalizing cannabis impact how much you pay for business insurance?

If we look to the north as an example, Canadian insurance companies have already made some changes to their policies.

In October 2018, Canada decriminalized cannabis use, opening the door for 30 million Canadians to use cannabis recreationally.

Canadian insurance providers had a year to plan, and for the most part haven’t made drastic edits to their policies.

As the industry moves forward, however, insurance companies are starting to ask cannabis business owners more and more questions. And with these questions come new concerns, hesitations and a possible greater cost of doing business in this sector.

Higher Insurance Rates for Cannabis Companies and Their Employees?

Some insurance providers already offer customized insurance to cannabis businesses. These policies extend to covering the loss of cannabis product to fire, flooding, theft and spoilage. Some policies also pay out if the cannabis manufacturer needs to issue a recall on one of its batches—so far, so good for the cannabis business owner.

Building insurance can also be tailored for a cannabis operators, though it may depend if the insurance provider wants to do business with a specific type of operator, such as a micro business, cultivator, non-volatile extractor, volatile extractor and so on.

Hesitant insurance companies may not want to offer insurance to the cannabis industry until more certainty in local, state and provincial law happens—and that may be years down the road.

Another wild card could be landlords and their tolerance to having a cannabis operator as their renter. A base rate of insurance could be determined by provincial or state regulators, however, a civic government can also impose additional fees for a cannabis company.

If the landlord feels that renting out their space to a cannabis operator carries an additional risk, they could ask for higher insurance coverage from the business, especially if the cannabis company shares space with nearby businesses that might have their operations effected by cannabis smoke or odor damage.

Your Cannabis Insurance Options Now

As more research is done and a growing number of states legalize the use of cannabis, insurance companies will adjust their packages and rates. More data will accumulate over the next few years from the early cannabis businesses.

These leading businesses—and the successes and failures they experience—will form the basis of cannabis insurance business packages in the 2020s and 2030s.

It is increasingly likely that over the next five years specialized insurance providers for cannabis-based businesses will begin operation. When that happens, expect more competitive pricing for these business owners from the increased competition.

Stay posted for more developments as they emerge. I am active in the industry and work with a number of cannabis business professionals to ensure they are on the right track and have the necessary resources and information to succeed.

Have questions or concerns about your cannabis business? Please contact me via email or give me a call at (626) 535-1480.




About Corey Tobin

With close to a decade of industry experience, Corey has worked with a number of small and medium-sized businesses and is knowledgeable about property and casualty, life and health insurance. Corey specializes in working with elevator contractors, manufacturing, distributing, healthcare and construction. Additionally, he is focused on the unique needs and challenges facing cannabis related business, including dispensaries, cultivators, extractors, developers and much more.

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