Industry Insights
May 2, 2024
Peter Berg

How to Insure a Cannabis Business in 2024 [Definitive Guide]

A Marijuana Business Daily factbook reports that the cannabis industry will add $112.4 billion to the US economy in 2024, up about 12% from 2023.

However, the focus of this post isn't huge numbers, because let’s be real — you’re already aware and that’s why you have a cannabis business license.

What excites us  is getting you closer to the numbers you aim to reach when starting a Canna business.

That’s only possible when you master the cannabis business risk mitigation and management strategies.

While insurance coverages must not be everything you should be relying on for cannabis business risk management, it still has a huge impact on your plan’s resilience.

Let’s dive into how you can insure your cannabis businesses in 2024.

How to Get Cannabis Insurance for Your Cannabis Business 

Launching a cannabis startup is exciting, but navigating insurance can be a challenge, especially when the money is tight for most entrepreneurs. 

Here's a breakdown to help you choose the right coverage solutions:

Step 1: Identify Your Business Needs

Ask yourself,

  • What type of cannabis business are you? (Cultivation, processing, distribution, retail)
  • What are your potential risks? (Property damage, product liability, employee injuries)
  • What assets do you need to protect? (Inventory, equipment, facilities)

Step 2: Research Cannabis-Specific Insurance Options

Refer to the list of coverages (discussed later in the article), and other more specific insurance policies to make an informed decision about what policies you need.

As a startup, you may want to get your hands on comprehensive policy bundles that may be an affordable choice for many small- or medium-sized cannabis businesses.

Step 3: Understand Policy Exclusions and Limitations

No policy covers everything. Read carefully to understand what's not covered and discuss potential add-ons with your broker.

Step 4: Partner with a Cannabis Insurance Company

Understanding cannabis policies, and prioritizing can get challenging. We, at Frontier Risk, empathize with businesses like you. 

Our experts are knowledgeable about the cannabis industry's unique risks and can help you:

  • Create a policy that perfectly fits your specific needs.
  • Offer the most comprehensive policies at market-competitive rates.
  • Stay compliant with state and federal insurance requirements.

Step 5: Secure Your Insurance and Implement Risk Management

Once you have the right coverage, actively minimize risks:

  • Install security systems
  • Implement safety protocols for employees
  • Maintain accurate records

Step 6: Regularly Review and Update Your Insurance

As your business grows and your risk profile evolves, our experts will review your coverage and ensure it stays current.

Top 5 Coverages Your Cannabis Business Needs in 2024

While the potential rewards are exciting, navigating the complexities of federal and state regulations can present unique challenges for cannabis business owners. 

Here are the top 5 cannabis business insurances you should have in 2024:

1. General Liability Insurance

General liability insurance is the cornerstone of your risk management strategy. Customer injuries, property damage, and even advertising mishaps are huge potential liabilities that cannabis businesses have to face regularly.

The average cost of slip-and-fall settlements in 2023 varied between $10,000 to $50,000. If there are fatal accidents involved, you can expect even higher costs. 

With general liability insurance, you’re covered against third-party claims, protecting your business from financial losses stemming from hefty lawsuits.

2. Product Liability Insurance

Cannabis products are consumed by people with a variety of expectations. No matter how carefully you operate, there’s always a risk of a lawsuit. 

But, you don’t need to worry about such liabilities harming your cannabis businesses when you’ve product liability insurance.

From misbranding to wrongful claims about their CBD products, cannabis businesses received thirty-three warning letters from the FDA in 2022.

According to the Insurance Information Institute, product liability lawsuits involving personal injury resulted in over $7 million in 2020.

These numbers underscore the importance of staying informed about the regulatory changes as a cannabis business, and having adequate insurance to fall back on in case things go south.

3. Crop Insurance

Cannabis is an expensive crop. But, diseases, pests, and most importantly extreme weather can devastate your valuable cannabis crops.

A 2023 American Farm Bureau Federation reports that weather-related crop losses amounted to $21.94 billion the previous year.

With crop insurance, you can rest assured that you’re protected financially to recoup losses due to natural disasters that can impact your harvest in 2024.

4. Workers' Compensation Insurance

Apart from the fact that worker’s compensation insurance is mandatory in most U.S. states, workplace accidents and illnesses are a reality in any industry, including cannabis.

The average cost of all workplace injury claims between 2020-2021 was $41,757, as noted by the National Council on Compensation Insurance.

Workers' compensation insurance ensures your employees receive medical care and wage replacement in case of a work-related injury or illness, protecting your business from financial liability.

5. Cyber Liability Insurance

Cybersecurity breaches are a growing concern across all industries.  However, cannabis businesses, holding sensitive customer data, are prime targets.

A study by Cybersecurity Ventures found that ransomware attacks will result in $265 billion lost annually by 2031.

With Cyber liability insurance, you can safeguard your cannabis businesses from financial losses associated with data breaches, cyberattacks, and ransomware, ultimately enhancing your credibility among customers.

Your Cannabis Businesses Needs Reliable Surety Bonds 

In addition to insurance, some states require cannabis businesses to obtain a surety bond as a condition of obtaining a license or operating legally.

Surety bonds act as a financial guarantee to the state that the business will comply with regulations and pay any outstanding taxes or fees. 

If you’re a cannabis business operating in Arkansas, Illinois, Oklahoma, or California, you can expect surety bonds to be required.

For the most up-to-date information on cannabis business licensing requirements, refer to your state's specific regulatory body's website.

A Look Ahead

The cannabis industry thrives on diversity. 

Whether you're cultivating top-shelf flowers, crafting innovative edibles, or operating a busy dispensary, your risk profile is unique. 

Understanding these specific needs is paramount when selecting the right insurance policy. 

Frontier Risk offers a comprehensive suite of coverage options, ensuring each client receives a tailored risk management strategy. 

So, are you ready to upscale your cannabis venture with confidence? Contact Frontier Risk today, and start focusing on your business’ operations, as we ensure your secure and successful future!

Peter Berg
Chief Development Officer
LinkedIn
Chief Development Officer at Frontier Risk, seasoned cannabis industry executive, with extensive corporate development, M&A, operational & regulatory experience.

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.