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  • Kyle Muscat

Cannabis Dispensary Insurance in Canada

Updated: Jan 12

Canada has observed a steady increase in the number of licensed retail cannabis stores since the enactment of Bill C-45, The Cannabis Act. As of the second quarter of 2022, this figure reached a new high at just over 3,230 stores, and counting. Over four fifths of the country's retail dispensaries can be found within just three provinces; led by Ontario (1,500), Alberta (759) and British Columbia (410).


It has been great to see this industry evolve over the years and we are proud to support so many entrepreneurs across the country. Having a comprehensive insurance policy is an integral part of any organization’s risk management plan and can help store owners insulate themselves from the financial consequences of an unexpected loss.

 

Cannabis dispensary

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Top 5 Types of Retail Cannabis Insurance Coverages


While not always obvious, there are a number of risks facing cannabis store owners. Each of which can have a significant and perhaps devastating effect on the financial health of the operation. This may include the cost of property damage, liability claims, cyber attacks or a loss of income due to prolonged business interruptions. Below we have summarized the 5 most common types of business insurance coverage purchased by cannabis retailers.


1. Property Insurance:

As the name suggests, property insurance protects against the cost of physical damage to property owned by the business. This would include items such as stock, equipment, computers and POS systems along with the owned building or any upgrades made to renovate a leased unit.


2. Commercial General Liability (CGL):

CGL - or commercial general liability insurance is a common requirement imposed upon stores by landlords, banks and provincial wholesalers. This is an essential form of coverage which protects against lawsuits arising from allegations of 3rd party injury or property damage. In the event of a claim, CGL insurance would cover the cost of legal defense and/or potential settlements.


3. Business Interruption:

This form of insurance allows store owners to recover any financial losses sustained from disruption in operations. Generally, the disruption must stem from physical damage to insured property – such as a fire or water damage to the store. This coverage would then cover any loss of profits and ongoing fixed expenses while the store is undergoing repairs.


4. Cyber Insurance:

Cyber insurance offers protection against the financial impacts of a cyber breach, theft or related system disruption. For example, this may include instances where POS systems are hacked, customer data is leaked or fraudulent bank wires are initiated. By extension, coverage would also be provided for related legal expenses, regulatory fines and public relations costs.

5. Directors & Officers Coverage:

Directors & Officers – or “D&O” protects board members and senior executives from personal liability in the event that they are sued for alleged errors or wrongdoing in their roles. This ensures that the leaders of the company are financially protected against the potential consequences of a claim brought against them. In addition, D&O insurance will reimburse the organization for any legal expenses incurred while defending against such claims.

How much does Cannabis dispensary insurance cost?


Most cannabis store owners in Canada can expect to pay between $4,500 to $6,500 in insurance per location. Note that this range is generalized, based on what we typically see for standard property and commercial general liability (CGL) coverage.


The cost of which does vary and is highly dependent on a number of factors which the underwriters and insurance companies will evaluate. This includes:

  • Revenue

  • Claims History

  • Property Values (Stock, Equipment, POS Systems…etc.)

  • Building (Year Built, Construction, Sq.ft, Sprinklers, Alarms…etc.)

  • Location

  • Years’ of Experience

  • # Employees

  • # Locations (multi-store savings)

Retail Cannabis Distribution in Canada


It’s important to note that the cannabis distribution model does differ by jurisdiction. Similar to alcohol, each of the provinces and territories have the authority to set their own regulations for the method of distribution and sale. In some provinces, this is done exclusively through government-run stores while others opt for a fully privatized or hybrid model.


For example, Ontario relies on a mixed model whereby recreational users can purchase cannabis products from in-person from private, licensed retailers or through the government operated online store. While Alberta and Manitoba have elected for a fully-privatized approach, Quebec and three others rely exclusively on government-owned operations. A full breakdown of the distribution type by jurisdiction is summarized below:


Fully Privatized System: AB, MB, NU, SK, YK

Public & Private (Hybrid): B.C, ON, NL

Fully Public System: NB, NS, NT, PEI, QC

Working with a cannabis-specific insurance brokerage


It is critical that cannabis business owners partner with an experienced and knowledgeable insurance broker who understands the nuances of their business. This includes a deep understanding of coverage options, terms and exclusionary language along with the varying provincial regulatory requirements.


Ready to Speak with a Dispensary Insurance Expert?


As a dedicated cannabis insurance practice, we support licensed producers and retailers across the country. Our team maintains strong relationships with all major domestic and international insurers, enabling industry-leading coverage at preferred market rates. Whether you have a few dozen stores, a franchise operation or are just starting out; our team is available to review your program and discuss coverage options.


Speak with a member of our team to learn how you can optimize your insurance program. We can be reached by email, or directly at (833) 422–6837.



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