Cannabis Business Insurance in Illinois
Cannabis Dispensary
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Cannabis dispensary insurance in Illinois

Each state has its own laws and regulations for cannabis business insurance. In Illinois, cannabis is approved for both medical and adult recreational use. Dispensaries must carry a surety bond in order to operate legally.

What types of insurance and bonds do Illinois dispensaries need?

In Illinois, cannabis businesses are regulated by the Illinois Department of Financial and Professional Regulation (IDFPR). The IDFPR requires cannabis dispensaries to carry a surety bond in the amount of $50,000 for each business location.

Surety bonds provide reimbursement if your business fails to adhere to the terms of a contract. However, they’re not the only coverage you need.

All cannabis businesses should carry general liability insurance, which they might need to sign a commercial lease, a loan, or a contract. This policy covers the most common risks of owning a small business, such as lawsuits from customers who suffer an injury or property damage at your shop.

To comply with Illinois law, businesses need to carry workers’ compensation insurance if you have employees. And, if you have any business-owned vehicles, state law requires that you carry commercial auto insurance.

Keep in mind that although Illinois has approved cannabis for medical and recreational use, some counties and cities in the state do not allow cannabis businesses of any type. For example, while Chicago and Rockford allow dispensaries to legally operate, the towns of Decatur, Lake Zurich, and Lisle have banned recreational cannabis businesses.

In short, you’ll need to research your state, county, and city laws to make sure your dispensary or other cannabis business is obeying the rules.

What other types of business insurance do I need for my cannabis dispensary?

While a surety bond is vital to running a dispensary in Illinois, it's not the only coverage you need. Dispensary owners should also consider the following policies:

  • Product liability insurance covers legal costs if a customer sues over harm caused by a product sold at your dispensary, such as an adverse reaction to an edible. It’s often included in general liability insurance.
  • Commercial property insurance helps pay for lost, damaged, or destroyed business property. For example, it can cover the cost of replacing stolen inventory or renovating a marijuana dispensary’s building after a fire.
  • Property policies sometimes include business interruption insurance, which covers costs when a fire or other covered property claim forces your business to close temporarily.
  • Additionally, you may need inland marine insurance to protect property in transit or stored off-site, as property insurance only covers items at your business location.

While these are a top priority for cannabis sellers, they aren’t the only policies you need to run a business. You can always call our dedicated agent at (872) 260-5150 if you’re unsure which policies you need.

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What are the laws and requirements for cannabis businesses in Illinois?

While Illinois has permissive laws for cannabis use, the industry is well regulated. Beyond insurance and bonds, there are several other requirements for running a cannabis store in Illinois.

Only licensed dispensaries are allowed to sell cannabis in Illinois. So, the first step is to apply for a Cannabis Dispensary License through the IDFPR. In addition to the application form, you must also submit additional materials, including your criminal record and proof of financial stability. There is also a non-refundable $5,000 application fee or $2,500 if you qualify as a social equity applicant.

The state operates on a social equity lottery system and only a limited number of licenses are allotted each year. It can be challenging to obtain a license because it requires both luck to win the lottery and social equity to be eligible.

If your application is successful, then you will be awarded a Conditional Adult Use Dispensing Organization License. This does NOT allow you to buy or sell cannabis. Instead, this license gives you 180 days to find a dispensary location within your assigned geographical region.

Once you have obtained a location and it has passed the state inspection, you will then be awarded a full Adult Use Dispensing Organization License. You must pay a $60,000 licensing fee for a two-year license ($30,000 for social equity applicants). After passing the state inspection and paying the licensing fee, you can begin retail operations.

Make sure to read the full list of Illinois' requirements to be sure you’re in compliance with the complete list of laws and regulations for Illinois.

How can I get business insurance for my Illinois dispensary?

If you run a dispensary, you can complete Insureon’s easy online application to get quotes from top U.S. carriers. For other cannabis businesses, you can call our dedicated agent at (872) 260-5150 to get insurance quotes for your business. Once you find a policy that fits your needs, you can begin coverage in less than 24 hours.

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Updated: February 28, 2024

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