Industry Insights
May 7, 2024
James Whitcomb

The Top 7 Reasons You Need Cannabis Insurance [Updated for 2024]

In the fast-paced world of cannabis, legal battles can pose a considerable financial threat, potentially causing businesses to face bankruptcy with claims as high as $1 million. 

But, we’re not here to scare you off. Cannabis is a booming industry with lucrative opportunities for everyone — or should I say, for the resilient ones.

Fortunately, with cannabis insurance, you can master the risk management strategies for your cannabis business, minimizing losses and focusing on expedited growth.

Cannabis insurance safeguards more than your investments; it also ensures compliance with regulations, providing stability amidst the ever-changing cannabis industry. 

This post lists the top 7 reasons your business needs cannabis insurance to thrive in this risky yet promising industry.

Top 7 Reasons Why You Need Cannabis Insurance 

As a cannabis insurance company, we've witnessed firsthand the crucial role comprehensive coverage plays in protecting businesses from unforeseen risks. 

Without it, companies are vulnerable to high-cost lawsuits that can even lead to closure! 

From theft and property protection to managing liability claims, here are the top 7 reasons why cannabis insurance is a must-have for industry players.

1. Protection against Property Damage and Theft

Shockingly, it's estimated that approximately 70% of Cannabis-Related Businesses (CRBs) operate entirely on a cash basis without any formal banking ties. 

This leaves CRBs vulnerable to handling large sums of cash, increasing the risk of theft and liability.

As a cannabis business owner, you're constantly exposed to such threats. In the unfortunate event of a break-in, fire, or natural disaster, you could suffer huge losses, including valuable inventory, equipment, and other assets. 

Cannabis insurance offers crucial protection by helping cover the costs of repairs or replacements, thus minimizing your financial burden.

2. Cybercrime Protection


The average payout for cyber incidents in the cannabis industry surged from $120,000 in 2020 to $550,000 in 2021, with the figures expected to rise even higher! The average claims request in the cannabis sector reached $2.2 million in 2021.

Cannabis businesses are more at risk for cybercrime due to several factors, and the financial implications of such cyber incidents are massive.

The industry operates in a legal gray area in many regions, leading to a lack of established regulations and standards for cybersecurity. This uncertainty can make it easier for cybercriminals to exploit vulnerabilities.

Plus, the nature of the products and services offered by cannabis businesses, such as online sales platforms and customer databases, makes them attractive targets for cyber-attacks and data breaches. 

These businesses handle sensitive customer information, including personal and financial data, which can be lucrative for hackers.

That's why cyber liability insurance is crucial for cannabis businesses — it helps recover lost data, compensates affected customers, and covers other damages. 

3. Higher Risk Of Product Liability For Cannabis Businesses

Cannabis businesses face a greater risk of product liability compared to other industries. This is because cannabis products, although mostly safe, are still new to many people and come with legal uncertainties. 

If a customer tries your product and experiences an adverse reaction, they could pursue legal action against your business, leading to major financial losses and business interruption. Research shows that product liability lawsuits in 2022 majorly targeted the psychoactive components and their concentration levels in the products. 

Plus, the FDA consistently issued warning letters to CBD-infused product manufacturers for their misleading advertising practices.

That's why cannabis businesses must have insurance for product liability insurance to cover the legal expenses, settlements, and medical fees resulting from liability lawsuits.

With robust product liability insurance, your cannabis business can mitigate risks and maintain financial stability in the face of unforeseen challenges.

4. Increased Risk Of Workplace Injuries

The 2024 Vangst Jobs Report shows a massive rise in jobs in the legal cannabis field, with over 440,000 full-time equivalent jobs as of early 2024. 


With such a vast number of people working in cannabis companies, the risk of workplace injuries goes up significantly. 

Many aspects of cannabis cultivation, processing, and manufacturing involve the use of hazardous materials such as chemicals and solvents. 

Your workers may also face risks associated with operating machinery, handling sharp tools, and working in potentially dangerous environments. In 2023, the top 10 disabling workplace injuries cost almost $48.15 billion for U.S. businesses. 

Because of this higher risk of workplace injuries, having Workers' Compensation insurance is essential for cannabis businesses. It helps cover medical expenses, lost wages, and other costs associated with injuries sustained by employees while on the job. 

5. Regulatory Uncertainty

The regulatory landscape of the cannabis industry is ever-changing, and I’ve seen it undergo several changes and policy updates in the past few years. 

The complex nature of these regulations, combined with frequent updates and strict penalties for non-compliance, poses significant hurdles for cannabis businesses.

Additionally, the cannabis industry is constantly under heightened scrutiny from federal agencies like the FDA and state-level regulators, as marijuana is labeled as a Schedule 1 drug. 

Owing to this gap between the Federal and State laws, cannabis businesses often have trouble accessing traditional banking services, thus forcing them to operate in a cash-only setting. 

This cash-only setting not only poses security risks but also hinders financial transparency. The American Bankers Association enforces that it’s about time the gap between cannabis-related federal and state-level laws is bridged.

While it may not be a permanent solution unless cannabis becomes legal federally, the SAFER Banking Act, if passed in 2024, would offer significant relief to the U.S. cannabis businesses, providing essential financial tools and reducing some of the risks associated with cash-based operations.  

Another constraint in the cannabis industry is limited market reach and growth potential for businesses. While Federal approval for interstate commerce can be a game-changer, it's not on the horizon yet.

With cannabis insurance, you can rest assured of receiving coverage for the high legal defense costs, fines, and penalties associated with unintentional regulatory violations, helping you navigate legal challenges without facing crippling financial losses.

6. General Liability for Cannabis Businesses

The financial impact of the legal fees and medical costs could be devastating, especially considering that about 300,000 personal injury claims are filed annually in the United States.

General liability insurance protects cannabis businesses against accidents involving people who aren't part of the company. If the business gets sued, the policy pays for legal fees, settlement costs, and significant medical expenses.

For instance, if a customer goes into a dispensary, trips over the doorway, and gets hurt, a cannabis insurance policy can cover those expenses. 

7. Peace Of Mind

Running a cannabis business can be stressful, but having insurance can really give you peace of mind.

Knowing that you're covered against possible losses can make you feel more secure and confident, allowing you to concentrate solely on growing your business and caring for your customers.

What’s Next? 

Ready to insure your cannabis business and enjoy the financial security and peace of mind that comes with comprehensive coverage?

Insuring your cannabis business is crucial for success in this competitive yet profitable industry. 

This is where Frontier Risk can help. We offer simple yet premium cannabis insurance solutions tailored to the unique needs of cannabis businesses. 

Get a quote now and unlock newer heights with our comprehensive cannabis insurance. 

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.

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