Operating a cannabis business is not cheap. With licensing fees, compliance costs, and inventory to maintain, budgets get tight fast. Cannabis insurance is one area where owners frequently find themselves overpaying. The good news? By taking the right decisions, you can get your hands on wonderful insurance coverage without spending a lot of money.
This guide outlines actionable methods to reduce your cannabis insurance premiums and keep you completely covered.
Why Cannabis Insurance Costs More Than Standard Business Insurance
There is a unique risk associated with cannabis businesses, and that drives up insurance prices. Insurers view the industry as particularly high risk because:
- Federal legal status — Cannabis remains a federally classified Schedule I substance, so insurers are unlikely to provide actual coverage
- Cash-heavy operations — Cash is the predominant currency for most dispensaries and growers, increasing the risk of theft and fraud
- Regulatory complexity — There is a different set of rules for each state, so that compliance is always an ever-moving target
- Product liability exposure — if a product causes injury, your business pays.
There is less competition because not many insurance companies cover cannabis. Less competition means higher prices. However, that does not mean you have to stay stuck overpaying.
6 Smart Ways to Save on Cannabis Insurance
Follow the strategy below to cut down on your cannabis insurance costs:
1. Work With a Cannabis Insurance Specialist
Not every broker understands cannabis. Overpriced policies may not suit your real requirements from a general broker.
A specialist in cannabis insurance knows:
- The insurers that do provide coverage for cannabis businesses
- What insurance cover limits are standard for the type of license you possess
- How to get better policy packages to save more.
Tip: Make sure to ask your broker how many cannabis clients they are currently servicing. Keep looking if the answer is less than 20.
2. Bundle Your Policies
Sometimes bundled policies get a discount when you buy more than one type of coverage from the same insurer. Policies commonly needed by cannabis businesses include:
| Policy Type | What It Covers |
| General Liability | Customer injuries, property damage |
| Product Liability | Harm caused by your products |
| Commercial Property | Your building, equipment, inventory |
| Workers Compensation | Employee injuries on the job |
| Cyber Liability | Data breaches and digital theft |
When you increase these together, insurers offer lower premiums for your loyalty. Make sure to ask about multi-policy discounts before signing anything.
3. Improve Your Risk Profile
Insurers price your business according to how insurable it appears. Cannabis Insurance premium with be lower for those who have a safer operation.
The following are things that can lower your risk score:
- Install a monitored security system — Cameras, alarms, and the presence of security guards will indicate that the risk of theft is low
- Maintain clean compliance records — No violations means no red flags for underwriters
- Train your staff regularly — Documented safety training reduces liability claims
- Keep detailed records — Of course, accurate inventories and sales logs show that your ship is steady
Others will require evidence of these systems before providing a quote. Have your documentation ready.
4. Choose the Right Coverage Limits
It is not better than more coverage. As a result, most cannabis businesses end up overpaying for more licenses than they really need.
Partner with advisers to ensure coverage limits reflect true risk exposure:
- A small craft grower does not need the same limit on product liability as a large multi-state operator
- A delivery is not the same as a brick-and-mortar dispensary, so different auto and cargo needs
- A seed-to-sale operation requires broader distinction than a first-stage enterprise
You will want to avoid over-insuring low-risk areas while under-insuring a catastrophic event that could sink you.
5. Review and Update Your Policy Every Year
Your cannabis insurance needs evolve with your business over time. A policy you purchased two years ago may not reflect how you operate today.
You also have this policy, which you should review once a year and ask:
- Has my revenue changed significantly?
- Have I added new products, services, or locations?
- Have I made upgrades to security or facilities?
- Are there new insurers entering the cannabis space?
The arrival of a growing number of new insurers is intensifying competition and reducing prices. Having an annual review helps ensure that savings is not left on the table.
6. Raise Your Deductible (Carefully)
Low monthly premiums as a result of a higher deductible. This trade-off can be cost-effective in the long run if your business has substantial cash reserves.
For example:
- Increasing a deductible from $1,000 to $2,500 can lower your yearly premium by as much as 10 percent to 20 percent
- This is best for companies with solid cash flow that can withstand a larger out-of-pocket expense in the event of a claim
Only increase your deductible to a level that you can afford if something goes wrong. Do not go after plans that would hurt you financially.
What You Should Never Cut From Your Cannabis Insurance
Saving cost is mandatory, but there are some coverage areas where the margins of risk are so high that they should not be skipped or under-funded:
There is, however, one area when it comes to cannabis businesses that should never be overlooked: product liability. Hundreds of thousands of dollars on a product recall or an injury lawsuit can wipe out even the best-prepared entrepreneurs. Ensure this coverage is solid before cutting costs elsewhere.
Other coverage areas you should protect:
- Workers compensation — Mandated in most states and essential for protecting employees
- Crop or inventory coverage — Fire, flood, or theft could wipe out months of production overnight.
- General liability — Slip and fall claims are common in retail cannabis settings
The Bottom Line
Have a budget for cannabis insurance? Cannabis insurance does not have to break the bank. Meaningful savings without having to put your business at risk can be achieved by working with a specialist, bundling your policies, improving safety practices, and reviewing coverage regularly.
Overpaying for insurance is the last thing the competitive cannabis industry needs. Shop smart for yourself so you can protect what you have built with so much hard work.
Looking for cannabis insurance quotes? Work with a cannabis-industry licensed broker to compare rates and determine the right fit for your U.S. business.
