Cannabis Insurance

It’s legal. What coverages does the Cannabis industry need?


As of November 6, 2018, a midterm ballot proposal to make recreational marijuana legal in the state of Michigan passed. The Cannabis industry will be fueled for growth.

According to Ballotpedia and Michigan State Law, ballot initiatives without specific start dates go into effect 10 days after the results are certified and that results are certified about three weeks after an Election Day.

So what does recreational marijuana legalization in Michigan mean for you and your business if you want to be a retailer, distributor or grower in the cannabis industry?

First, know that it is important for you to have an experienced advisor and we can assist in navigating any of the issues specific to you and your business. With cannabis still illegal, according to the federal government, it can be tricky.

For Business Coverage (Retailers/Growers)

The proposal requires Michigan’s State Legislature and the Department of Licensing and Regulatory Affairs (LARA) to determine when retailers can begin selling marijuana but applications will be open about a year after the proposal goes into effect.

According to the proposal, marijuana will have a 10% excise tax in addition to Michigan’s state-wide sales tax (six percent).

Because marijuana has been legalized state-wide, unless your individual city has voted to opt-out of allowing marijuana-related businesses, your city will soon be home to dispensaries, accessory shops, and greenhouses. If you are curious about if your city has opted out, you should contact your local government.

The legalization of recreational marijuana means that these businesses will need a place to create and sell their goods. Each city is making their own determination on whether this is something they want to allow. An increase in real estate demand and open properties mean real estate prices typically drop; if property is scarce, your rent could increase, driving some businesses out and allowing others in. In some areas where cannabis growers have opened up, rents have increased significantly.

Insurance is complicated for new industries; you want to make sure that you understand your specific policies and your exclusions don’t prevent you from getting the coverage you need.

What kind of coverages do you need in the Cannabis industry?

  • Most cannabis retailers and growers will need traditional business insurance of property and general liability. However, there are some special coverages that will also be necessary.
  • In Colorado and Washington, product liability insurance is required for all recreational cannabis operators and is recommended for retailers, distributors, and manufacturers. Product liability coverage covers costs when a product you sell causes harm or makes someone sick. Many manufacturers have this type of coverage and it is even more important when it is something that is ingested. Understanding how much coverage you will need is where things get difficult, but can many times be alleviated with an excess policy.

Additional things to consider for those in the cannabis industry:

  • Since marijuana is heavily a cash-based business, additional limits may be needed for theft.
  • With most products, cannabis not excluded, product recall insurance may be something to consider as a recall could drain your business financially.

Even if you are not in the cannabis industry, you need to think about your organization’s policies.

  • As an employer you need to review your drug policies. This applies to both the hiring process and after a prospect has been hired. If it is written in corporate policies, candidates can be eliminated from the hiring process if they are drug tested and marijuana is found in their blood stream, especially in manufacturing or other industries where someone under the influence could harm themselves or others.
  • And like showing up to work drunk, employees may be terminated for coming to work high. However, you need to protect yourself and your organization by making sure that your team knows and understands your policies and procedures.
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Headquartered in Rochester Hills, Mich., Allied Insurance Managers is one of the largest, privately-owned, independent insurance agencies in Michigan.