Opening a new cannabis retailer in Canada can be both an exciting and daunting task. It’s been nearly two years since it’s legalization, but in provinces like Ontario, cannabis retailers are still few and far between, but growing by the day.
If you are in the process of opening a store, you might sometimes feel a little bit isolated. For example, it’s really hard to get something as basic as a business banking account, with the majority of financial institutions unwilling to support (we’ve got a great recommendation here by the way if you need one!).
Insurance is no different. Most Canadian insurance companies are unwilling to insure businesses in the cannabis industry. There are a few reasons for this, including exclusions in their own reinsurance policies (insurance for the insurers) but also because this is a new area for the economy and insurers don’t typically like jumping into new things without plenty of study and data.
However, there’s no need to worry. We’ve got your back and have developed relationships with the small number of insurance companies who proudly support the cannabis industry.
|Next Wave||A specialist insurance provider who focusses only on the cannabis industry – from seed to sale – backed by Wynward Insurance Group, an A-Rated insurance carrier.|
|O2||One of the first specialty insurers in Canada who focusses solely on the cannabis industry – backed by Lloyds of London and other carriers.|
|SUM||A large, national Managing General Agent, offering a wide range of commercial insurance products who have become on of the country’s leading insurers of the cannabis industry.|
|Cansure||One of Canada’s largest specialty insurance providers with a wide range of property and casualty products. Cansure has developed a leading position in the cannabis industry.|
|Trinity Underwriting||A specialist insurance provider with focussed solutions for Canadian businesses. Trinity have solutions for other cannabis businesses, e.g. testing facilities.|
Each of these insurers brings their own strengths to the marketplace and have products which focus on different parts of the cannabis industry in different provinces.
So, what insurance do I need for my Cannabis Store?
As a retailer, you will need to consider the following coverages which can typically be purchased as part of a package:
- General Liability – this covers you for bodily injury or property damage as a result of your business activities. If you are leasing a property, this will be a requirement of your landlord before you can sign your lease. This coverage also typically includes protection for personal and advertising injury, employee benefits liability and liability arising out of non-owned autos.
- Product Liability – this covers you for bodily injury as a result of the products you sell, i.e. cannabis. As you might imagine, this is the most critical part of your coverage, and typically accounts for half of your premium by itself. You will need $10,000,000 of coverage as a cannabis store in Ontario. This limit varies and is lower in other provinces.
Did You Know?
in Ontario, you will need $10,000,000 of General and Product Liability coverage in order to get your OCS license?
- Building – if you own your building you will need to insure it for perils such as fire, water escape, flood, earthquake etc. The process and types of questions you will be asked are similar to any other type of commercial property insurance, except there are far less insurers willing to provide quotes. If you lease your property, you will not need this coverage.
- Contents, tenants improvements and stock – if you are leasing your property, you will need to include any improvements you make (e.g. your fit out) which won’t be covered by your landlord’s insurance. You will also need to insure other business contents, fittings and of course your stock of cannabis and other ancillary products.
- Business interruption – this is a critical insurance that covers the typical earnings that your business would have made, if it is unable to operate due to a claim on the property, e.g. a fire on the property means your cannabis store can’t open for 4 months and loses substantial revenue during that period.
- Crime – there are a range of coverages here, but typically these relate to employee dishonesty (e.g. employee theft), robbery, credit card forgery or receipt of counterfeit currency in exchange for your product.
- Boiler & Machinery – this extends your property coverage to also cover loss or damage to your property caused by equipment failure of boilers or other pressurized machinery on your property including physical damage but also spoilage.
Some insurers will offer these as part of a package and others may only be able to offer selected parts of these coverages. Your Mitchell & Whale insurance broker can help you navigate this process so you can get the coverage you need at the best price.
How much will my insurance cost?
The answer to this question depends on how much product you expect to sell and the value of your property, fittings etc. However, as a ballpark, for an Ontario cannabis store including the minimum $10,000,000 of liability coverage, you should budget from around $8,000 a year (plus taxes).
If you need to start your insurance significantly in advance of opening the store, e.g. you need insurance for your landlord only at this stage, then you may have the option to start your policy with reduced liability coverage and add the remainder in a few months once you have your license. This will likely reduce your price to approximately $4,000 on an annualized basis, and then increase once you start receiving cannabis and selling.
There is usually an option for you to spread this cost using a monthly payment plan.
How do I start the process?
Mitchell & Whale have trained and experienced brokers working with businesses similar to yours. We are able to gather your information, shop the market and generally help you navigate this space with ease. Give one of our brokers a call to find out more.