Insurance for Cannabis Businesses: Navigating the Complexities

Starting a cannabis business is no small feat, and just like any other industry, having the right insurance coverage is essential. Whether you're cultivating, processing, or running a dispensary, or if you're in an ancillary role like real estate or transportation, getting insured isn't just a suggestion—it's often a requirement. 

Yet, as the cannabis industry grows, insurance options haven't always kept pace. Many cannabis businesses find themselves facing higher premiums, limited options, and a lot of uncertainty.

The Basics of Insurance for Cannabis Businesses

When it comes to insurance, there are two primary markets: admitted and surplus lines. Admitted insurance covers standard needs—think of the policies you’d get for your car or home. These policies are widely available and heavily regulated.

On the flip side, surplus lines insurance steps in where admitted policies fall short. This market covers unique or high-risk scenarios, like a celebrity insuring their voice or arm, and for cannabis businesses, most insurance falls under this category. 

The surplus lines market exists because regular insurers often shy away from taking on these risks, leaving cannabis businesses to navigate this more niche (and typically more expensive) market.

Finding the Right Insurance Coverage

Securing insurance in the cannabis industry can be tricky. In many states, regulations require businesses to have specific insurance policies before they can get licensed. This applies to everything from dispensaries to delivery services. 

The challenge, though, is that cannabis insurance isn’t always easy to find—especially at competitive prices. In states like California, where the cannabis market is more developed, you may find it a bit easier to locate brokers or insurers willing to offer policies. 

Some states even provide lists of approved brokers, but more often than not, you'll end up with a surplus lines policy. While not ideal, it’s better than operating uninsured or underinsured.

What’s on the Horizon for Cannabis Insurance?

Insurance companies are slowly warming up to the cannabis industry, but there are still plenty of challenges. Unlike other industries, there isn’t a lot of historical data on cannabis business claims, making it difficult for insurers to determine premiums or fully understand the risks. 

Plus, because cannabis remains illegal at the federal level in the U.S., many insurers are hesitant to jump in with both feet.

Take Alabama, for instance. They’ve taken steps to create a cannabis insurance market for medical marijuana businesses, but it's still early days. 

The state has started encouraging insurers to submit rates and filings for marijuana-related coverage, but there's no concrete timeline for when these policies will be available. It's a small step in the right direction, but it shows just how slow progress can be.

What Cannabis Businesses Need to Know Now

As the cannabis industry continues to grow and evolve, insurance options will likely improve—but we’re not there yet. Businesses in this space, from growers to retailers, need to stay informed and understand their insurance needs. 

Right now, that often means navigating the surplus lines market and working with brokers who specialise in high-risk industries.

While the future may bring more admitted market options and better coverage, for now, cannabis businesses should focus on building solid relationships with knowledgeable brokers and staying compliant with state regulations. 

As always, keeping an eye on legislative changes is crucial, as they can impact everything from premiums to coverage availability.