Industry Insights
Apr 30, 2024
James Whitcomb

Cannabis Insurance Explained: What It Is, Costs, Why It Matters in 2024

Cannabis is a high-risk high-return industry that is expanding at full capacity.

However, the industry’s expansion translates to increased risks that traditional insurance companies can’t solve.

Under the Federal Law, cannabis maintains its status as a Schedule I drug which creates confusion in the market, making the cannabis industry highly volatile, while still lucrative.

This is why you need coverage from specialized cannabis insurance companies. 

But what is cannabis insurance and how is it different from regular business insurance?

This blog post explains what cannabis insurance means, why it matters, the risks it protects you from, and the cost breakdown in 2024. 

Let’s get into it!

What is Cannabis Insurance?

Cannabis insurance protects cannabis companies from various business risks and liabilities. 

A traditional insurance company doesn’t understand the unique risks of the cannabis industry, so it’s crucial to partner with a trusted cannabis insurance company. 

A comprehensive cannabis insurance plan includes policies tailored to the unique needs of cannabis cultivators, manufacturers, distributors, and retailers, providing financial protection against events like theft, property damage, crop loss, and liability claims.

If you’re a cannabis entrepreneur looking to raise significant investment for your venture, there’s one thing you must be excellent at - cannabis risk management.

Your risk management strategies give you an edge over competitors and appeal more to investors. 

Why Does Cannabis Business Insurance Matter?

We see plenty of cannabis businesses struggle and one of the reasons is improper insurance. 

But, why do you need cannabis business insurance instead of a traditional one? Here are three reasons why cannabis business insurance matters more than you think:

1. Protects Your Business Against Everyday Risks

The cannabis industry involves valuable and sensitive products with strict compliance regulations. 

A cannabis business faces more risks than any other brick-and-mortar store.  

Business disruptions happen all the time, but things can get worse in an industry like cannabis where regulations and risks keep evolving. 

For example, a common risk for cannabis dispensaries and other cannabis businesses is the challenges in accessing banking services.

We could list a hundred more risks, but the good news is that cannabis insurance provides a safety net against these risks helping your business maintain smooth operations.

2. Cannabis-Specific Insurance Offers More Coverage

According to the National Association of Insurance Commissioners, a 2021 report found the majority of insurers provide commercial and general liability, property damage, and cannabis product liability coverage with limits set at $1 million per occurrence/$2 million aggregate

However, policyholders might require higher limits, such as $5 million per occurrence/$10 million aggregate, or even more. This number serves as a reference point for entrepreneurs starting a venture in 2024. 

When you purchase CBD insurance, we highly recommend you be mindful of all the risks involved, and go for an insurance that understands your requirements!

3. Compliance and Peace of Mind

Operating a business is stressful - no matter which industry you’re in. 

With a comprehensive cannabis insurance plan, you can focus on business operations with a clear, peaceful mind.

Besides, many jurisdictions require cannabis businesses to have certain types of insurance to operate legally. 

This could include surety bonds required for cannabis business license issuance, and worker’s compensation insurance if your business involves people.

Cannabis Insurance Costs in 2024

The cannabis insurance costs are influenced by several factors including a company’s risk profile, business activities, location, size, and revenue, claims history, and coverage limits and deductibles.

If you’re looking for a ballpark figure, consider contacting us at Frontier Risk. Our experts will assess the unique requirements of your company, and come up with a well-suited solution for you.

Cannabis Business Insurance Costs for Different Market Segments

  • Cannabis Retailers/Dispensaries: On average, you can expect cannabis dispensary insurance premiums to range between $350 to $7500 annually. Dispensaries must possess traditional business insurance and policies focused on retail operations, including workers' compensation, directors' and officers' liability, employee theft, and cyber insurance. Premiums may vary based on gross sales, and the location of your dispensary. 
  • Medical Cannabis Dispensaries: The cannabis general liability insurance premiums can range between $980 to $3400. Medical cannabis businesses may require Errors & Omissions insurance coverage among other coverages, which can be premium.
  • Hemp Companies: Despite access to Government crop insurance from the 2018 Farm Bill, hemp companies still require traditional business coverage. As per Cannabis Business Times, premiums for a $1 million policy could reach up to $150,000 annually for General Liability Insurance, E&O Insurance, and Product Liability Insurance, among others.
  • Cannabis Cultivators/Growers: Cannabis crop insurance premiums can cost anywhere between $680 to $7,700. Cannabis growers face unique challenges, with limited access to federally backed insurance (only restricted for Hemp cultivators). Cultivators must seek coverage for equipment breakdown, natural disasters, and leakages. 
  • Cannabis Distributors: Commercial auto liability insurance premiums may lie between $1200 to $3500. Cannabis distributors require policies such as automobile liability and cargo insurance. However, premiums may be influenced by the distribution model and integration into the supply chain.

There’s one thing every cannabis business owner is looking forward to in 2024 - federal legislation. 

Owing to 2024 being the election year, we might see federal governments expediting cannabis legalization as more Americans favor it

With legalization, the industry will move towards stability, which will reduce some of the risks the cannabis industry currently faces, ultimately reducing insurance costs.

What’s Next?

Got your cannabis business license? Congratulations!

Your next objective is getting your cannabis business insured. 

Cannabis insurance through a company that understands cannabis is necessary if you’re looking to thrive in this highly competitive, yet lucrative industry.

That’s where Frontier Risk comes in. We offer simple, yet premium cannabis insurance solutions to businesses operating in this challenging landscape. 

Get a quote now, and unlock newer heights with the peace of mind that comes with our simple and effective insurance strategies!

James Whitcomb
Chief Executive Officer
Chief Executive Officer at Frontier Risk, builder of some of the largest cannabis supply chains in the industry; cannabis social equity pioneer; restructuring and corporate finance executive.

Cannabis Insurance Made Simple

We understand your operations, pain points and risks – because we’ve lived them firsthand as former operators at leading cannabis companies.