A single overlooked safeguard could turn a covered claim into a costly denial. Here’s what every cannabis business should know.
As an agent, you’ve probably fielded every question imaginable from cannabis clients. Why is my premium so high? What’s my deductible? Do I have enough coverage? But one question rarely comes up, and it should: What happens if my protective safeguards fail?
Protective safeguard requirements might not sound as pressing as theft coverage or property limits, but they carry just as much weight. One missed maintenance check or expired monitoring contract can be all it takes for a claim to be denied. “Accuracy and ongoing compliance are essential to avoid costly surprises at claim time,” says Lee Woodruff, VP, Jencap Cannabis Practice. “The moment a business misrepresents a safeguard—even unintentionally—it can create a serious coverage gap.” It’s a small detail that makes a massive difference, especially in a sector where compliance defines success.
Why Cannabis Operations Face Stricter Safeguard Rules
Most property policies include basic safeguards, but in the cannabis insurance space, these requirements are often far stricter. Elevated theft, fire, and liability exposures mean insurers underwrite with the assumption that these protections are in place and fully functional, which makes them conditions of coverage, not optional add-ons.
Common protective safeguard endorsements in cannabis insurance policies include:
- Automatic Fire Sprinkler System: Must remain operational at all times, with a verified backup water supply.
- Central Station Fire Alarm: UL-certified monitoring with active service contracts.
- Central Station Burglar Alarm: Required to cover theft and vandalism exposures.
- Video Surveillance System: Continuous recording with a 30+ day storage minimum, often mandated by state regulation.
- Security Guard Service: May be required during business hours or even 24/7 at cultivation or warehouse facilities.
- Perimeter Fencing and Lighting: Maintained to deter unauthorized access.
- Vault or Safe Storage: Cannabis inventory must be secured in UL-rated safes or vaults after hours.
How to Stay Compliant and Covered
Protective safeguard endorsements are triggered by the information provided on your client’s insurance application. If a cannabis business indicates that certain systems, like alarms or vault storage, are in place, the carrier assumes that’s true and issues the policy based on that representation. If those systems aren’t actually active or fail to function at the time of a loss, coverage for that event may be excluded entirely.
Take a look at these real-world examples. Are any of your clients at risk for a similar scenario?
- At a busy downtown dispensary, the burglar alarm system still blinked red every night, but the central monitoring contract had quietly expired. When thieves forced entry after hours and cleaned out product and cash, the owner assumed the system was still connected. It wasn’t. The insurer denied coverage, citing failure to maintain the required safeguard.
- A cultivation site temporarily shut down its sprinklers for routine maintenance during harvest prep. Days later, a small electrical fire sparked in a drying room and spread before anyone could respond. Because the system wasn’t operational at the time of the fire, the loss fell outside policy coverage.
- A retail dispensary had an after-hours procedure requiring all flowers to be locked in the vault each night. One rushed closing shift skipped the step. By morning, the glass display cases were shattered and the shelves empty. The claim was denied, because inventory left unsecured didn’t meet the vault storage safeguard required by the policy.
Each example underscores the same reality. Failure to maintain or document compliance equals exposure.
Checklist: What Cannabis Businesses Should Do Now
Encourage your clients to take action, using this helpful guide.
- Review Your Policy: Identify all protective safeguard conditions at binding and renewal.
- Maintain & Document: Keep alarm, sprinkler, and security service contracts current. Test systems regularly and store maintenance records.
- Be Accurate: If a safeguard isn’t fully operational, don’t check the box on the application.
- Compare Requirements: Don’t assume your insurance policy matches state cannabis regulations. Policies often impose stricter safeguards than state law.
Why Agents Partner with Jencap
Understanding how protective safeguard endorsements work and how they can impact claims is vital for agents placing cannabis insurance. Jencap’s Cannabis Practice helps agents spot red flags before binding, ensuring clients stay compliant and covered. “Our team has seen firsthand how small oversights can derail a claims outcome,” says Woodruff. “We work with agents to review every endorsement line by line, so there are no surprises when it matters most.”
FAQ: Common Questions About Protective Safeguards
What happens if a required safeguard temporarily goes offline?
Notify your insurer immediately. Some carriers may allow a grace period or partial suspension of coverage, but silence could void protection.
Do state cannabis security regulations automatically satisfy policy requirements?
Not always. Insurance policies often have additional or stricter requirements beyond state mandates.
Can a safeguard be removed or modified?
In some cases, yes. If an insured does not meet a particular safeguard requirement carriers may agree to adjust the applicable safeguard symbols depending on the risk. Jencap specialist brokers will help manage these situations and negotiations with carriers.
Protect Your Clients from Costly Claim Denials
Protective safeguards can be the difference between full recovery and no coverage. Work with Jencap’s Cannabis Practice to ensure every safeguard is understood, documented, and maintained, because compliance goes beyond smart business to become your client’s safety net.
