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It’s no secret that the cannabis industry has boomed since California first legalized cannabis for medicinal purposes in 1996. Cannabis use, possession ballot initiatives and legislative bills have passed in over 44 states. The industry generated $9 billion in 2017 and experts predict sales will rise to $21 billion by 2021.
But rapid change has induced some confusion. Of the 44 states with laws on their books, only 11 legalized recreational use. The remaining 33 only permit medicinal marijuana. The constantly shifting legalization map represents a challenge for both consumers and growers who want to stay on the right side of the law. And for insurers, it presents an opportunity.
Have you considered joining this rapidly growing industry? Here’s what you need to know about its legality, the insurance coverage you’ll need and the 8 best cannabis insurance companies.
The Best Cannabis Insurance Companies:
- Competitive Pricing: MFE
- Best for Wide Product Range: Cannabis Insurance Company
- Best For Focused Service: Cannasure
Where is Cannabis Legal?
Cannabis isn’t legal to consume, grow or sell in all 50 states. Educate yourself on local laws before you light up or write up a business plan.
Legal Recreational Use
Each state defines the amount of marijuana considered acceptable for recreational purposes differently. You’re allowed 1 ounce in Alaska, but you can have 2.5 ounces in Maine. Don’t just assume that you’re safe to purchase pot. Check the local laws and triple-check the legal limits.
Recreational use is legal in the following states:
|Legal Recreation Use|
Legal Medicinal Use
You’ll need a diagnosed condition to obtain medicinal marijuana, a prescription and possibly a medical marijuana card. Medicinal marijuana use is legal in the following states:
|Medicinal Cannabis Use|
|Massachusetts||Michigan||Minnesota||Montana||New Hampshire||New Jersey|
|New Mexico||New York||North Dakota||Nevada||Ohio||Oregon|
Where is it Legal to Grow Cannabis?
Growing for Personal Use
Individuals can have a small number of marijuana plants in their home for personal growing purposes in some states. Massachusetts residents can have up to 12 plants and California residents are allowed just 6. The laws get even hairier in Washington, D.C., where you can have 6 plants but only 3 can be in bloom.
Always check your local ordinances before you start to grow your own. Individuals can grow their own plants in the following states:
|Legal To Grow For Personal Use|
|New Mexico||Nevada||Maine||Massachusetts||Michigan||Washington, D.C.|
Growing for Commercial Use
Commercial cultivation laws can even vary by county within a particular state. For example, growers can’t cultivate marijuana in either Los Angeles or Alameda counties in California. Think you might want to start a larger operation? Talk to local experts and consult a lawyer.
|Legal To Grow Commerically|
|New Jersey||New Mexico||New York||North Dakota||Ohio||Oklahoma|
|Oregon||Pennsylvania||Rhode Island||Utah||Washington||West Virginia|
Who Needs Cannabis Insurance?
Are you operating a cannabis business? You need insurance related to the crop and product you sell. Cannabis insurance can protect you from property losses, liability losses, some crop or product losses and equipment breakdown.
Coverage varies by company and policy type. You may need to purchase several cannabis insurance policies to fully cover your business, which could include dispensary or cultivation insurance.
What Companies Offer Cannabis Insurance?
|Cannasure||Alaska, Arizona, Arkansas, California, Colorado, |
Connecticut, Delaware, Florida, Hawaii, Illinois,
Indiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Montana, Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania,
Rhode Island, Vermont, Washington, D.C., Washington, West Virginia
|Cannabis Insurance Company||All 50 states|
|AFIG Cannabis Insurance||Alaska, Arizona, Arkansas, California, Colorado, |
Connecticut, Delaware, Florida, Hawaii, Illinois,
Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, Utah, Vermont, Washington, D.C., Washington,
|420 Insurance||All 50 states|
|SafeHerb||All 50 states|
|MFE Insurance Brokerage||All states except Arkansas, South Dakota, North Dakota, Massachusetts, |
|Admiral Insurance Cannabis |
|All 50 states|
|Cover Cannabis||All 50 states|
What Does Cannabis Insurance Cover?
Whether you run a dispensary or a grow house, you’re operating a business and will need business-related insurance to protect yourself from lawsuits, loss of income or to replace damaged equipment.
Traditional insurance companies have been cautious about entering the cannabis industry and often limit their coverage to commercial general liability, property liability and product liability coverages at $1 million per occurrence or $2 million aggregate per coverage type. Traditional insurance policies often exclude crime-related claims but cannabis businesses need coverage in this area.
It’s often best to work with an insurance company that specializes in the industry. For example, 420 Insurance offers general liability policies that start at $1 million in coverage and go up from there. Admiral Insurance’s cannabis group pays out up to $5 million.
Some insurance companies offer just an overarching cannabis insurance policy and others provide coverage for specific industry sectors, such as:
- Cultivation insurance: This insurance for growers protects plants, equipment and business income.
- Dispensary insurance: Dispensary insurance is intended for dispensary operators and covers your property and inventory in the event of a loss. It also covers any liability and loss of income.
- Manufacturing insurance: Insures against direct physical loss in the manufacturing process.
- Building insurance: Involves liability or property insurance for a building used to house a grow operation.
- Delivery and transport insurance: Protects business owners from damage or theft during transport from the extractor to the dispensary.
- Laboratory insurance: Protects cannabis companies from liability and professional liability if you engage in laboratory testing.
- Product liability: This insurance protects your company from bodily injury or property damage lawsuits incurred by a product defect if you sell, manufacture or distribute cannabis. It also includes damages from mislabeled products or lack of proper warning labels.
- Hemp-CBD insurance: Provides coverage to growers, extractors, wholesalers or retailers of HEMP/CBD products.
Discrepancies between local, state and federal laws have kept most banks out of the cannabis industry. They will not allow cannabis-based businesses to open accounts, which has forced a cash-based industry. This is why it’s a good idea to consider purchasing a policy that specifically covers crime-related losses.
In addition to industry-specific coverage, consider buying professional liability insurance, liability insurance or other insurance policies.
How Much Does Cannabis Insurance Cost?
The cost of cannabis insurance varies among providers and depends on the coverage and coverage amounts selected. Rates can be impacted by:
- Size of the operation: The cost for a small dispensary’s general liability insurance could be just $700 a year, but a large cultivator could pay $3,000.
- Complexity of the operation: A dispensary may need product coverage, business liability insurance or building insurance. But a full-scale company could need all this plus crop cultivation insurance, laboratory insurance, transport insurance and more.
- Optional coverage selections: Due to its often cash-based business model, many cannabis companies opt for optional crime-related insurance. This can add significant cost to your insurance premiums.
- Past occurrences: Generally speaking, any time you make a claim on an insurance policy, your premiums will rise. You’ll pay more for insurance if your store has been burgled in the past.
Cannabis insurance can be quite expensive compared to other types of commercial insurance. Additional industry risks, such as crime, combined with a lack of claims data to build risk tables, makes many insurers cautious when pricing a policy. Cultivators in California could pay $20,000 – $30,000 for basic insurance.
Our Top Cannabis Insurance Picks
Many cannabis insurers are private companies and don’t disclose their rates. Request quotes from several insurers to find your cheapest option.
1. Competitive Pricing: MFE
MFE Insurance offers the best overall cannabis insurance coverage selections. The company serves businesses of all sizes, from a single dispensary to a full-service grow operation. You’ll find the policy you need with MFE because of its wide range of coverage and experience.
Coverage options include general liability and product liability, workers’ compensation and employee benefits, liability, loss of income insurance, equipment breakdown insurance and more. You can apply for a quote online, by email or over the phone. The company has a five-star Google rating and positive online reviews.
2. Best for Wide Product Range: Cannabis Insurance Company
Some of the cannabis insurance providers in the market sell standard business insurance policies to cannabis businesses. But Cannabis Insurance Company customizes its product offerings to the industry.
You might own a dispensary, be a cultivator, manufacturer, transporter or more. No matter what, you’ll find policies with options specific to your niche at Cannabis Insurance. For example, a cultivator’s policy could protect your crops against lighting, fire, explosion, hail and smoke and water damage. Cannabis Insurance Company is a great pick for a larger, more established cannabis business which needs to cover many aspects of production.
3. Best For Focused Service: Cannasure
Cannasure’s 10 years of experience conveys the image of a focused, professional company. Launched to serve the cannabis industry’s insurance needs, Cannasure has an in-depth knowledge of its unique nature. Unlike other insurance agencies or brokerages which tack cannabis insurance onto existing product offerings as an afterthought, Cannasure is 100% focused on cannabis insurance.
Cannasure doesn’t just sell policies to dispensaries and cultivators; it covers every part of the industry, including hemp and CBD. Landlords who rent to cannabis businesses and may not be able to buy normal property insurance can get coverage through Cannasure. Cannasure also serves businesses related to the cannabis industry and sells policies to hydroponic stores, glass blowers, tobacco shops and more.
Insuring an Industry in Flux
The only certainty is that the insurance market won’t look the same today as it will in 10 years.
As the cannabis industry evolves and grows, so will the insurance companies that serve its needs. More claims experience will lead to refinements in policy premiums. Legal clarity will entice larger, traditional insurers into the market and more competition will lower premiums. It’s an industry to keep an eye on.