According to a report from Grand View Research, the cannabis industry is expected to reach more than $70 Billion in revenue by 2028. This is a big number for a sector that did not exist in a legitimate way until quite recently.
This rapid growth has resulted in a lot of uncertainty in the industry, including whether or not companies that are a part of it need business insurance and what coverages could be right for different segments of it.
As the industry becomes more and more regulated, businesses will face increased levels of risk. This includes staying in compliance with state regulations so you can maintain your license to operate, lawsuits from customers who use your products and the potential financial risk of thefts and workplace incidents.
The costs associated with handling these risks could easily put a cannabis business, especially a new one, out of operation.
A relatively small investment in insurance could help protect the business you’ve worked so hard to launch, nurture and grow.
In this article, we’ll reveal the top insurance companies for businesses in the cannabis sector, which is critical information since so many insurers serving them are sketchy, fly-by-night operations. We’ll also explain what types of coverages could benefit different types of cannabis businesses.
- The unique tech risks faced by cannabis operations
- What insurance coverages do cannabis companies need?
- What other coverages should cannabis companies consider?
- Types of cannabis businesses, the top risks they face, and coverages they typically need
- How much does cannabis business insurance cost?
- How can I find cheap cannabis business insurance?
- Top 3 insurance companies for cannabis businesses
The unique tech risks faced by cannabis operations
No matter what kind of cannabis business you own, technology plays a big role in it. State regulatory agencies require that everyone involved in the cannabis supply chain track every product from seed to sale. This involves a lot of online records and record keeping. Add to this the marketing, sales, employment and business records saved online and you can see the high level of cyber risk faced by cannabis businesses. All these virtual records, which are generally not well protected by startup cannabis operations, are an easy mark for cyber attackers.
Recovering from a hack can be costly, and often results in small cannabis companies going out of business. One way to protect against this is to get adequate cyber insurance coverage. It will help to pay to inform customers and employees if their records are ever exposed in a hack, costs to release files if you’re ever the victim of a ransomware attack and expenses related to lawsuits if someone is financially harmed because their personal information was exposed in a hack against your company.
What insurance coverages do cannabis companies need?
Cannabis businesses need certain types of business insurance coverage to protect its operations. The most common ones include:
- General liability insurance
- Business property insurance
- Product liability insurance
- Directors and officers insurance (D&O)
General liability insurance for cannabis companies
General liability insurance which helps protect businesses against injuries that happen to customers on your business property.
For example, if a customer slips, falls and breaks a leg while shopping in your cannabis store and sues you over it, general liability insurance will cover medical, legal and settlement costs related to the incident.
>>MORE: Best General Liability Insurance Companies
Business property insurance for cannabis companies
Business property insurance or also called commercial property insurance will cover your business location and its contents against weather related threats, vandalism, and theft.
For example, if your dispensary is cleaned out by thieves, business property insurance will help pay for the lost products and any assets in the dispensary.
>>MORE: Best Commercial Property Insurance Companies
Product liability insurance for cannabis companies
Product liability insurance covers you if something goes wrong with one of the products you manufacture or sell and a customer sues you over it.
For example, a customer has a bad reaction to a gummy made by your company and sues, product liability insurance would pay legal and settlement costs related to the law suit.
>>MORE: Best Product Liability Insurance Companies
Directors and officers insurance (D&O) for cannabis companies
Directors and officers insurance is usually required by investors. It protects them, along with company directors and officers, if they’re sued because of the business advice they provide or direction they take the company in or over regulatory issues.
For example, if your company fails to meet state regulatory requirements related to product purity, directors and officers insurance could pay some or all of the fines levied by the state.
>>MORE: Best Directors and Officers Insurance (D&O) Companies
What other coverages should cannabis companies consider?
Some other insurance types purchased by businesses include:
- Workers’ compensation insurance provides benefits to employees if they become injured or ill for work related reasons. This includes paying for medical care, lost income, disability and death benefits if someone dies on the job. If your business has employees, it’s likely your state will require you to get workers’ comp coverage. Learn more at the best workers comp insurance companies
- Commercial vehicle insurance covers you and the people who work for you when driving for business purposes. A personal auto policy doesn’t cover accidents that happen when working. Learn more at the best commercial auto insurance companies
- Employment practices liability (EPLI) insurance protects you and your business if a worker sues you over employment related issues like discrimination or sexual harassment.
- Errors and omissions (E&O) insurance covers you if your business is ever sued because you or an employee provide incorrect, inadequate or incomplete advice to a customer and they sue you over it. Learn more at the best E&O insurance companies
- Business income coverage replaces lost income if you can’t operate your business for covered reasons such as a fire or significant weather related damage. Learn more at the best business income interruption insurance companies
- Cargo / inland marine insurance covers products when transported over land — via truck or train — or while temporarily warehoused by a third party. Learn more at the best inland marine insurance companies
- Crop insurance protects cannabis growers against the loss of crops because of a weather event or reduced revenue because of price fluctuations in the cannabis market.
Types of cannabis businesses, the top risks they face, and coverages they typically need
Here are the top risks faced by different types of cannabis operations and the insurance coverages they typically get to protect against them.
- Cannabis dispensaries
- Cannabis cultivators
- Cannabis manufacturers
- Cannabis landlords
- Cannabis testing laboratories
What business insurance coverages do cannabis dispensaries need?
Primary risks: Dispensaries need protection against changing regulations, theft, harm to business property, giving bad advice and employee injuries.
Top insurance coverages:
- Business income
- Business property
- Cyber liability
- Employment practices liability
- Errors and omissions
- General liability
- Product liability
- Workers’ compensation
What business insurance coverage do cannabis cultivators need?
Primary risks: Cultivators face a wide range of risks to their operations, including fire, equipment breakdown, lost crops, theft and vandalism.
Top insurance coverages:
- Business income
- Business property
- Cargo / inland marine
- Commercial vehicle
- Crop insurance
- Cyber liability
- General liability
- Product liability
- Workers’ compensation
What business insurance coverage do cannabis manufacturers need?
Primary risks: Cannabis manufacturers face significant risks related to regulatory requirements, damage to their equipment, theft and product manufacturing flaws.
Top insurance coverages:
- Business income
- Business property
- Cargo / inland marine
- Cyber liability
- Employment practices liability
- General liability
- Product liability
- Workers’ compensation
What business insurance coverages do cannabis landlords need?
Primary risks: Landlords renting to businesses in the cannabis industry face an unusual set of risks and challenges. Many insurance carriers refuse to cover claims from landlords who rent to cannabis businesses if it’s not disclosed as part of the yearly insurance renewal. This is in addition to typical landlord risks like fire, vandalism and weather related damages.
Top insurance coverages:
- Business income
- Business property
- General liability
- Workers’ compensation
What business insurance coverages do cannabis testing laboratories need?
Primary risks: Testing labs are the final decider on whether products are safe and efficacious. They have to be on top of ever-changing rules and regulations. They typically operate out of large facilities and use expensive scientific equipment to do their work.
Top insurance coverages:
- Business income
- Business property
- Errors and omissions
- General liability
- Product liability
- Workers’ compensation
What business insurance coverages do cannabis delivery businesses need?
If you deliver cannabis products and don’t have commercial auto coverage, you could be held personally liable if you or an employee has an accident while on a delivery run. Personal car insurance doesn’t cover on-the-job accidents. Larger delivery businesses face the risk of product theft and other losses while out on the road.
Top insurance coverages:
- Business income
- Business property
- Cargo / inland marine
- Commercial auto
- General liability
- Workers’ compensation
In the end, it’s up to you to work with your business insurer or insurance agent to find the right coverage for your type of cannabis operation.
How much does cannabis business insurance cost?
The cost of cannabis insurance depends on several factors: the types of insurance coverage, the size of the business, the number of employees, the annual revenue, the location, etc. However, if a cannabis business gets one policy only, be it general liability insurance or product liability insurance.
The average cost of a general liability insurance policy is $800 to $3,500 a year for a small cannabis business. And the average cost of a product liability insurance policy is $1,440 a year.
If you want to get an affordable business insurance policy for your cannabis business, be sure to shop around with a few companies to compare several quotes to choose the best one for your business.
How can I find cheap cannabis business insurance?
Finding low cost coverage could be challenging because so few reputable insurance companies offer it. Here are some tips to help you find the protection you need at a fair price:
- Shop around for the best value. Get quotes from a few companies and compare them to get the right coverage at the lowest possible cost.
- Don’t stop shopping around. Make sure you get new quotes before you renew your policy.
- Take advantage of discounts. If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent.
Taking these steps will help ensure you’re not paying too much for insurance for your cannabis business.
Top 3 insurance companies for cannabis businesses
Here are our top picks for best cannabis business insurers. Be aware that they don’t offer all types of business insurance to all types of cannabis companies in all states. Coverage can be a bit spotty.
- The Cannabis Insurance Company: Best for Tailored Packages
- biBerk: Best for low-cost cannabis coverage
- THREE: A single source for all your cannabis business insurance
The Cannabis Insurance Company: Best for Tailored Packages
Dedicated exclusively to providers in the cannabis industry, The Cannabis Insurance Company offers a surprisingly wide range of insurance. They have tailored packages for each area of the market, so it’s easy to just pick the coverage that works best for your business. You’ll find products for cannabis laboratories, cultivators, dispensary, and delivery services. They also offer insurance for hemp/CBD providers.
They also offer all types of business insurance coverage that any cannabis company would need from general liability insurance, professional liability insurance, product liability insurance, commercial property insurance, commercial auto insurance, workers comp insurance, etc.
If you are interested in getting a cannabis insurance policy from this company, you have to call or email them. They do not offer online quote yet.
biBerk: Best for low-cost cannabis coverage
biBerk is a low-cost business insurance provider. Despite saving money on your cannabis coverage, you can rest assured knowing you’re still getting quality protection for your company. biBERK is able to lower insurance costs by almost 20 percent because it insures small businesses directly, without the added costs of having to work through a middleman or insurance broker.
You can rest assured knowing biBerk is a part of Berkshire Hathaway, a company headed by well-known investor Warren Buffett. It’s a firm that has millions of satisfied customers that’s been insuring people and businesses for more than 75 years.
THREE: A single source for all your cannabis business insurance
THREE is another insurer that’s part of the Berkshire Hathaway family of companies. It offers a single policy that covers certain types of cannabis businesses in defined locations. The firm prides itself on the fact that it has a simple three page policy with no fine print or surprises.
The single policy covers:
- Liability: General liability, errors and omissions and employment practices
- Cyber: Cyber liability, data compromise and incident response
- Property and business interruption: Fire, theft, flood and water damage, wind and hail and earthquake
- Business auto: Collision, comprehensive, auto liability and hired and non-owned
- Workers compensation
If simplicity and comprehensive coverage are important to you, THREE could be a good provider for your cannabis business insurance.
